patrick.net

HARM,

Through all of this I have sought some... form of vindication. Having a Law and Economics Prof. (NOBEL... winning law and econ. prof.) echo those very same sentiments in the Wall Street Journal is just about all a guy could ask for!

To have this impactful a piece of legislation passed and say it *hasn't influenced consumer behavior is beyond me? It DEFINES our behavior. Thankfully there were a few comments that owned up to lax lending being the fuel (but the CGE being the spark).

Whether you want to blame Clinton for the U.S.S Cole or Bush for Iraq, hey whatever, that's someone else's job. What's should be apparent is that unless we get a handle on the CGE, any correction is bound to be short lived and we'll only get a new and improved version of equity raiding and property flipping.

I haven't been able to access the full article yet so if anyone has a WSJ sub can you please post it here? For all posterity?

The fed doesn’t set rates, they change rates in relation to how much and at what rate banks are requesting loans from them. The fed doesn’t create money, they loan money temporarily with collateral.

KT,

See my somewhat lengthy post on the Fed & inflation in the Greenspan-on-Crack thread.

Technically, you are (partially) correct: the Fed does not "set" bank retail/wholesale rates directly, but they can (and do) have a powerful influence on them by directly setting critical interbank lending rates: the FF & discount rates.

Technically, it is also true that the Fed does not directly create money, but they can (and do) increase or decrease the money supply at will via M3 by making money cheaper and more abundant for its member banks (loose money policy) or more expensive and scarcer (tight money policy).

Technically, it is also true the Fed cannot "force" banks to lend money, or "force" consumers and businesses to borrow, but they can (and do) make it profitable or unprofitable for banks to lend irresponsibly via their rate-setting and other regulatory policy levers --reserve requirements, underwriting/lending rules, etc.

Technically, the man behind the curtain can't make the weather, but he sure as hell knows how to turn a mild shower into a Category 5 hurricane --and keeps on proving it to us. The terms "Easy Al" and "Greenspan Put" were not coined for no reason.

Duke,

Agreed. I just hope Bernanke is both willing to realize and able to act. Over on Piggington, someone cleverly coined the term "S*itty Asset Crisis", because that is what we have, not a "liquidity" crisis.

FYI:

Liquidity Vs. Solvency

@Duke,

But recessions, risk, deflation and the business cycle have been repealed --that's been the guiding principle of central banksters, right?

Next on the agenda: gravity, bad weather, unhappiness & death.

HARM,

Krugman's article was even on the same day. He may have been the inspiration.

DinOR,
I will grant you a victory lap as I know this is your pet topic. One of the more interesting lines in the WSJ op-ed was: yes, good citizens, housing counts as consumption. Now that's not something you hear every day (we don't need no stinkin' CapX, oh wait, the roof is leaking). At its best housing can be an enforced savings account with a built in inflationary hedge, but MEW seems to have done away with those quaint notions.

And since we are beating dead horses, I will flog the whole securitization was bolted onto the REIC conspiracy theory. I am betting several years from now the securitization engine will be ramping back up, "any two will do" will still be on the books, and home prices will have reverted to the mean, but the REIC won't look anything like what we had several years prior. The internet continues to change how we interact with RE and mortgage brokers are slowly being legislated out of existence (helped along by banks pulling their rate sheets). I favor CRs position and say that Accelerant Al didn't help matters, but it IS securitization that allows cash to come back on to the banks balance sheet so they can CREATE more money (via additional loans as allowed in a fractional reserve banking system). Perverse incentives in the lower end of the securitization stream allowed this thing to get out of contol and the REIC is going to be shown the door.

And just as the B—–S looked to their parents for support (then put them in old age homes) and looked down their noses at the later generations, now they are asking the probing questions like “What do you think will happen…….” “Are you interested in maybe…….”

Malcolm, I really do think that soon, very soon, our dear Boomers will be flooding ebay with their Boomer-crap (TM) . One of us should start tracking the number of Harley's, RV's, complete Rolling Stones box sets, waterskis, time shares in Cozumel there are for sale. Might be a reasonable economic indicator - the Boomer Distress Indicator (TM) .

They are really something aren't they.

double-digit wage inflation in China?

Wages have been going DOWN since the mid-70s.

I did not say REAL wage. I heard that inflation is also serious in China.

What do you think will happen…….” “Are you interested in maybe…….”

Oh man, that's the worst. I finally had to tell my mom point blank that they couldn't come live with me. Sucks. But there's no way I'm going to let them take me down the financial sinkhole. I can't even begin to wrap my brain around the way they think. Common sense doesn't seem to be involved in any way. They're in Thailand now with my brother and my mom is already making self-pitying phone calls to me. But hey, I tried to talk sense to them. I'm also finding out that a lot of my dad's friends tried to get him to sell sooner, lower the price on the house and so on. They tell me that they had no more luck than I did in getting through to him. My parents live in their own little world.

SQT,

You did your level best. If there was any failing, it certainly wasn't on your part. I'm trying to picture just how much of an experience that must be for your folks?

EBGuy,

Thanks, I just wish there were a lot more people taking that victory lap with me. Why? Because you're right. Even while the HB is still very fresh in our minds (many in the mainstream) will pretend it never happened and will be ready to go double or nothing!

Of course securitization will have had all the bugs worked out (ha) and we may go to "any... 3 will do" but there's already so much steam gathering behind "the recovery". For many it's been months since a RE comm. and 2 years since their last MEW extraction/tax free flip!

I'd even read one clueless CR poster say "Since they make you hold the "asset" 2 years it would be a Long Term Cap. Gain anyway! So it would only be a 15% tax bill!"

Please send that $75,000 check to:

I agree, things will look different than they do now but we seem determined to keep the same incentives in place. It will still be, research "up and coming" areas, buy, fix, flip! Likely on a smaller scale but the "game" will remain intact.

@SQT,

We've all had our own "no educating the willfully ignorant" moments, just not quite as up-close-and-personal or dire as yours. Forget the guilt trip --you either put your family's well being first or let Prodigal parents drag you down with them. No contest in my book (not that they won't still try to make you feel like shit about it).

Peak Oil, meet Peak Debt:

One in Five Expect to Borrow to Heat Homes This Winter

"For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll.

Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills. The poll, commissioned by CreditCards.com and conducted by GfK Roper Public Affairs & Media, surveyed 1,004 randomly selected American adults by telephone Dec. 7-9, 2007 to gauge their attitudes about energy costs in 2008. A majority say they expect oil and gasoline prices to get worse in 2008."

DinOR :

It's easy to make the mistake of underestimating the effects of the CGE. First it happened loooong time ago ;-) Look at it this way. People sincerely think MID *only* helps to make houses more affordable.

The effects of Govt policy are not always easy to quantify. And there are non-quantifiable effects as well. It changes the psychology - which is a fundamental effect but not always obvious. We simply learn to accept the rules and behave accordingly - without questioning WHY the rules are such and what would happen without them. A big example is happening now as every year. Tax loss selling. What would happen if there was no cap gain on stocks AND no deduction could be taken on the losses ? No one asks that question.

I would also give the analogy of NFL and NHL. It's not common to see NHL players almost killing each other. But the retribution, if any, always seems insufficient. Try that kicking and punching in NFL. Every minor "unsportsmanlike like conduct" has a penalty associated with it. Both are high adrenaline games. But have very different human behavior.

Point is, policy matters. Far more than most people realize.

Guys,

I'll be in SF for a weekend. What's a good area to stay in? Union Square? Marina District? Mission?

“Since they make you hold the “asset” 2 years it would be a Long Term Cap. Gain anyway! So it would only be a 15% tax bill!”
Uh, yeah... you'd kinda expect better from the crowd at CR, but then again there are some people who post single word "First!" entries when new threads are created. And don't worry, I'm sure that guy is advising his cousin who did a short sale that his "capital loss" is deductible.

It will still be, research “up and coming” areas, buy, fix, flip! Likely on a smaller scale but the “game” will remain intact.
Quite frankly, I don't begrudge these folks their earnings as they can provide a valuable service by revitalizing housing stock (and this is a risky business, as evidenced by what is currently happening). But to address your concerns, as part of the REIC disassembling, the "owner occupied" check box on the loan application will no longer be "just a suggestion". You can bank on that...

I’ll be in SF for a weekend. What’s a good area to stay in? Union Square? Marina District? Mission?

I usually prefer the financial district. It is quiet on weekends. Watch out for bums though.

Four Seasons has nice rooms and beds. If you prefer Union Square there is the Grand Hyatt. For Nob Hill, there is Huntington.

You may also want to try some boutique hotels.

skibum - boomer crap LOL!

The only thing good is the Harleys, good gas mileage, can be built into 3-wheelers like the old Servi-Car, easy to work on, switch and swap parts, at least most of the stuff made here and a lot of people know how to build them up from the bare frame -and that often after they've built the frame.

As we get back to a basic The Waltons type economy, Harleys will go back to being what they were, a people's vehicle.

The Chinese official inflation number is 6%, but just as our CPI, the number is highly manipulated. Food staples, according to official numbers, are advancing at 15-30% a year, pork price in major cities is already higher than the that of the US. Most people doing business in China already notice that the cost advantage is not that great (rent, materials, utilities etc.), except for dirt cheap labor. China is a developing country so food staples account for a much higher percentage of monthly spending than us, which means, their inflation number should be much more driven by food than transportation, clothing, etc.

Sooner or later, China will have to export their inflationary pressure to us.

Peter P,

you won't see $60 oil again. It's not just about peak oil, it is about waste paper USD.

USD Depreciation is a preferred path for the WS who are stuck on the wrong side of the bets, that's the easiest way for our great debtor nation to off load our burden.

StuckinBA,

Well of course sellers/realtwhores don't take MID into account when pricing! Uncle Sam WANTS you to own a house!

One of my favorite scenes is from H.G Wells, The Time Machine where our time traveler can't understand why the Eloy don't even question who lays out their daily feast! It's here. It's always here. You ask too many questions.

Not to detract from the current line of discussion, but...

In the graphic for this thread, what is the asterisk after "Free Helicopter Inside!" denoting?

EBGuy,

I never grudge anyone an honest profit. What I should have said is that "Housing as an investment" is here to stay. Or at least it won't just go off and die the quiet death it should?

Sadly, now CGE may be viewed as a conerstone of "the recovery" as the jockeying begins anew.

In the graphic for this thread, what is the asterisk after “Free Helicopter Inside!” denoting?

* Includes 0% financing offer of a 2-person piston helicopter for the first 10 days, 27.75% APR afterwards.

In the graphic for this thread, what is the asterisk after “Free Helicopter Inside!” denoting?

Or,

* Possible moral hazard. Use with precaution, only under Fed supervision.

Ah, there it is. If you turn your head sideways and squint…

* The term “FREE” is used here anecdotally and shall not be construed to mean "No financial obligation on the part of the consumer.” You are strongly encouraged to make all scheduled payments as per the terms of the purchase agreement. We offer our “Help” to you, the distressed serial consumer in good faith that you will use it to meet your legal obligations concerning your mortgage.

Ok, who the hell is running Ron Paul's campaign?

Paul keeps donation from white supremacist

Is the $500 USD and "principle" of keeping the money really worth all the damage this will inflict on his campaign, thanks to an already-hostile MSM repeating every "racist" accusation as fact?

Is the $500 USD and “principle” of keeping the money really worth all the damage this will inflict on his campaign, thanks to an already-hostile MSM repeating every “racist” accusation as fact?

Yes. There should be no damage.

"Dr. Paul stands for freedom, peace, prosperity and inalienable rights. If someone with small ideologies happens to contribute money to Ron, thinking he can influence Ron in any way, he's wasted his money," Paul spokesman Jesse Benton said. "Ron is going to take the money and try to spread the message of freedom."

This is brilliant!

I will take donations from animal rights activists and feast on veal and foie gras!

NOT SOLICITATION OF DONATIONS

Forget the guilt trip –you either put your family’s well being first or let Prodigal parents drag you down with them.

I say, let da market sort it out! Ha-cha-cha-cha! Me likely sushi and hanging out with my pals from my MBA program.

There "should" be no damage, just like the media "should" do more research before parroting NAR talking points verbatim. And people "should" run the numbers before borrowing a million bucks.

Huh? Who is Peter P Nis?

Looks like someone has a (mildly evil) blog impersonator.

Interesting quote (copied from Ben's blog)

“Damato said that it would be impossible to find a lender for almost anyone who wanted a loan without income documentation, so many of the laws are already out of step with the current market. And, that market changes weekly and sometimes daily.”
“‘I could do stated (undocumented) income loans on conforming loans until last week. … Now I can’t,’ he said. ‘It’s changing every day.’”

He could do no-doc loans till last week ?? This is freaking amazing. No wonder I cannot see the boxes of credit crunch in Safeway yet. But I guess it's coming soon. The "market" is changing daily. I like that part.

An awful lot of these white "supremacists" are in actuality separatists, who just want to live among their own, not be told who to hire, who to promote, etc and are tired of race-based affirmative action (what needed to be set up was wealth-based affirmative action).

Take away the forced busing, the race-based handouts, etc., and you've taken the wind right out of their sails.

Thus, since this Stormfront fellow is donating to help elect Paul, he's actually hoping to in essence, put himself out of business.

It's just not anything to worry about. But we can count on the press to make a big hairy deal out of it.

Peter P Says:
December 19th, 2007 at 5:44 pm
"Huh? Who is Peter P Nis?"

You do get that it is a bit of a play on words right? Get it? P-Nis. Funny, but it will get old pretty quickly.

@DinOR

Been otherwise occupied and away. Details omitted because it's pretty much a sob story and I'm a "Don't cry for me Argentina" kind of guy.

Great day today. ACA downgraded from A to CCC. MBIA and Ambac get a negative outlook. FGIC on review for downgrade. Munis on pins and needles.

MS sells a chunk to the Chinese.

Ahhh. Napalm in the morning. And evening too.

For the first time in 20 years, I'm seriously considering stacking dry 50s in the corner.

Harm & DinOR

Thanks for the support. I'm trying not to let the guilt get to me but it's tough. My husband is playing the part of the bad guy to get me off the hook a bit (nice of him, don't you think?). But I think I'm going to have to really keep them at a distance. I mean, they "borrowed" $100k from my brother without paying it back. I don't have "stupid" stamped on my forehead.

(Yeah, they really did blow $100k of my brother's money. Everyone thinks their family is insane until they meet mine)