patrick.net

While zzyzzx is correct, that is unpossible politically.

If you put on your 'barack obama hat' and think like a marxist you can guess what probably actually IS in store for us after his re-election (he can safely do even crazyier stuff then).

Here is my prediction what they will expand/start next as 'programs to help housing':

1. A mortgage payment for certain FHA loans will be capped at '31% of your income'. (already doing this for years with federal loan mods and this new undawata refi program). In fact they are doing this with student loans now too (capped at 10% of income regardless of how much you owe)

So what is the price of home home? doesnt matter its 31% of your income and taxpayers foot the bill for the rest.

2. More and more loan mods and undawata REFI, and down payment assistance.

3. More and more 'buy a HUD home from the feds for $100 down'.

4. More foreclosure delays, more tenants rights to rent back the same house that was just foreclosed (and/or squat)

These programs are already here, already sfaffed up, already approved, already have budgets and have been running for years. All under Obama. These programs (like most all government) will only get bigger and distort the whole economy around them even further.

Maybe you people in the Bay Area cannot afford a house due to all the S-8 renters living 'well' in your fine city. The red states all have affordable housing - the blue states punish the middle class. I would say red state is better for middle class to live and blue state is better for poor/welfare class and the very rich/well off.

"Preventing a free fall in home prices has less to do with homeowners/keeping home prices high and more to do with the US economy."

Most people fail to understand that. THey think that you can have plummeting home prices and skyrocketing foreclosures and they can just swoop in and buy for pennies on the dollar. They forget to realize that falling home prices directly increase unemployment and will bankrupt states and cities, which will mean higher taxes down the road, as well as reduced services. Less cops and more crime. Fewer teachers and lower test scores, etc.

"The red states all have affordable housing..."

Housing in Red states is not as "affordbale" as you think since wages there are generally lower.

bgamall4 says

cc0 says

Well, I'm not seeing it yet.

You have to look at the chart on this article I wrote.

That's a very confusing article. I should clarify that what I couldn't see was the claimed causality, not that it happened. Your chart and article assumes a causality which I gave alternate explanations to in my comment above.

I would like to make a request. In the article you state:

It is starting to look like the libertarians want the easy money loans, and the liberals want to control the casino [...] This seems counterintuitive, given the efforts by the libertarians to expose speculation. But the libertarian/Murray Rothbard/Ron Paul/Paul Ryan con is that in the name of freedom and restoration that comes from their massive cuts private banks, banks will be able to lend recklessly.

Easy money is the grease of innovation and bankruptcy is the lever of retribution. The argument should be made that a "bank" shouldn't be involved in the transaction at all. But we have to differentiate between the entity that takes deposits and makes loans (credit unions, S&Ls), and those entities that underwrite securities. The problem is of course that these distinctions were erased and "they" gambled with "our" money. Bankruptcy is effectively not an option because Keynesian systems don't work in reverse.

Now, "libertarians" is a broad group of people, but please don't put Paul Ryan and Eric Cantor in the same league as Ron Paul, or refer to GOP people as "his party". Ron Paul has a legitimate message for the betterment of people and nation. Republicans see only the "cut taxes" part, with a large superstitious bent, and vote in blocs. But they do have giant bags of money and a "legitimacy" that the Libertarian Party does not have. That Ron Paul is a Republican is simply a statement that the political system is driven by money, not message.

bgamall4 says

Hiding loans off balance was illegal for Enron, legal for the banks.

Enron created a related party and removed the assets and liabilities off their books to the related party. Never consolidated or disclosed the related party.

So who was the "related party" which the banks used to remove their Assets and Liabilities ?

taputu has it backwards. Employment affects house prices. Rising wages causes house prices to rise. The converse is untrue however. Lower house prices does not cause unemployment to increase. I chose Marina and Seaside, but you can look at foreclosures now in Monterey and Carmel. CARMEL!
House prices are falling and that is not a bad thing, because the rise in prices was a credit bubble, NOT based on rising income. So, this had to pop.

clambo says

Lower house prices does not cause unemployment to increase.

Really, so what happened in 2008 then?

tatupu70 says

so what happened in 2008 then?

LOL, the home ATM ran out of money.

The housing bubble blowing up was the contributory cause, but not the direct cause.

Kinda like how the 9.0 earthquake didn't cause much of Japan to become dusted with Cesium 137.

Just kinda happened! Causal chains are not important.

http://research.stlouisfed.org/fred2/graph/?g=33C

bgamall4 says

They hid them in SIV's. They didn't even need to create a second party, they just hid the loans from the investors completely.

Which doesnt even come close to what you orginaly said or Enron did or even NetFlix.. do you even know anything about Finance ?.

How about this .."Factoring your reveivable" the selling of your receivables to meet your cash flow...

Many do that even today from small to large companies, that too would be considered SIV. The simple case its no longer legally your receivable and you lay no claim to it. This is hardly hidding anything...

bgamall4 says

Now that is a disturbing statement. Easy money is the predatory attack of the financial community on unsuspecting main street victims.

It's context dependent and you cut out the critical bankruptcy part. Don't confuse access to capital with malinvestment. An organization that can't loose money without destroying the financial system giving money to consumers so they can pay too much is quite a different thing from going to the NSF for a grant to study chameleon reproduction or a loan to pursue an advanced degree.

bgamall4 says

He wants to cut food stamps 66 percent, balancing the abuse of banks on the hunger of children.

I don't want to get too political, but states should be able to manage their own affairs. Otherwise, why not just let the U.N. handle food stamps? But hard money could seriously disrupt bank abuses - fiat debt based money practically demands that people be abused.

bgamall4 says

[...] social security [...] a ponzi and he should not have said that.

The only difference I see between the two is that SS doesn't promise you a positive return; Medicare on the other hand .... however, it's difficult to dispute that the systems aren't founded on the same principles -- that there'll always be more money in the future. Keynesians can promise that, but that's not true in a hard money system.

bgamall4 says

Rothbard was a racist. And Rand Paul, because of his box that is libertarianism, could not support the 1964 civil rights act which allows people to eat where they want.

Well, one of those is an ad-hominem, and Thomas Jefferson both owned slaves and opposed slavery. I suppose it's too bad that the Civil Rights Act didn't apply to golf courses.

cc0 says

The only difference I see between the two is that SS doesn't promise you a positive return;

You need to look harder then. SS can run indefinitely with a stable birth rate. Ponzi requires ever increasing numbers of investors.

Is Ponzi the Republican buzzword of the year or something? Every time I turn around something is being compared to or called a Ponzi scheme.

There is nothing cryptic about what I asked..

I still think that to 'accerlerate the drop in house prices' (if that is your #1 issue) then you should vote Mitt Romney.

He at least is saying 'let the foreclosures rip and dont delay em'.

Part of the 'hope' of Obama admin is hope they can reinflate the housing bubble. Why is he so loved on this blog? Isnt any policy maker who acts to keep house prices artificially high via taxpayer money working AGAINST main st and FOR the banks? Am I confused here? I would have voted for McCain but he had huge plans to 'reinflate bubble/reduce principal balance, etc' - it was shocking from a Repub but of course they are the same party arent they? they are fooling us, the banks own both parties.

tatupu70 says

You need to look harder then. SS can run indefinitely with a stable birth rate. Ponzi requires ever increasing numbers of investors.

I suggest it is you who needs to look harder. Ponzi promised a positive rate of return. If he were a bank he could even pull it off in a Keynesian system. In that light, today's banking system is a Ponzi scheme.

However, Social Security doesn't promise a positive rate of return. In fact - at least at the outset - it promised a negative rate of return. Some people would end up ahead, but most people would pay in more over their lifetimes then they would get in return. For people born in 1930 the life expectancy in the U.S. was 59 for men and 63 for women. By the time you were able to retire there was a good chance you'd already been dead for quite a few years. (To be fair, if you were ~40 you'd probably live to ~70.)

And as you stated, it does require a constant influx of money. Just because you call it "birth rate" doesn't make the requirement for constant additional input in amounts greater than the expenditures anything different. Instead of Ponzi's scheme being designed for constantly increasing "investors", SS is designed for a constantly increasing population of investors. Both are unsustainable on a finite planet.

But that's really trivial compared to Medicare. Under that program, even if you're a two income couple earning $178,300/yr you end up about $140,000 ahead in benefit payouts over your lifetime.

http://money.usnews.com/money/blogs/the-best-life/2011/01/05/social-security-medicare-a-bargain-for-many

bgamall4 says

If you are only for voluntary associations and apply that to public facilities, not private clubs, you are racist.

Libertarians by definition must be racist because they believe in public exclusivity.

As I said, Libertarians are a whole bunch of people, and assert that most of them believe that a government (public facility) must not unjustly discriminate against any of its own citizens. It's well accepted that justice be blind, and justice is a government service.

However, you do suffer from some seriously flawed logic circuits. Your first statement is that all voluntary associations naturally result in racist behavior. I disagree with that, and think you show much about your true nature.

"bgamall4 says

PockyClipsNow says

He at least is saying 'let the foreclosures rip and dont delay em'.

Two problems with Romney. 1. the foreclosures could be illegal. He doesn't care. 2. he has hired the Bush economic advisors. Their economic policy was supply side easy money toxic lending and war.

Those would likely be Romney's economic policy as well.

Gary Anderson strategicdefaultbooks.com

Come on man, illegal foreclosures? Basically no one is foreclosed who is current on payments. This robo signing issue is gonna be over soon (10 years probably! ha)

Also I would like to point out that "supply side easy money toxic lending and war. " is the Obama policy and the policy of probably anyone who could possibly have any chance to win. The bankers would be ok with 12 month foreclosures - under obama its now 24 months average. Really. Thats a big deal.

PockyClipsNow says

Part of the 'hope' of Obama admin is hope they can reinflate the housing bubble.

No, it's really not. It makes a nice strawman though...

cc0 says

I suggest it is you who needs to look harder. Ponzi promised a positive rate of return. If he were a bank he could even pull it off in a Keynesian system. In that light, today's banking system is a Ponzi scheme.

What the heck are you talking about? Yes, banks offer a positive rate of return on deposits. That has nothing to do with Keynes or a Ponzi scheme.

cc0 says

And as you stated, it does require a constant influx of money. Just because you call it "birth rate" doesn't make the requirement for constant additional input in amounts greater than the expenditures anything different. Instead of Ponzi's scheme being designed for constantly increasing "investors", SS is designed for a constantly increasing population of investors. Both are unsustainable on a finite planet.

You obviously didn't understand. SS isn't designed for constantly increasing population, nor does it have to be. It is designed for a steady state of population. Unfortunately, science is allowing people to live longer which makes it tricky to balance the inflows and outflows. But it most definitely does NOT require a increasing population. That's why it is completely different than a Ponzi.

cc0 says

But that's really trivial compared to Medicare. Under that program, even if you're a two income couple earning $178,300/yr you end up about $140,000 ahead in benefit payouts over your lifetime.

And changes need to be made as lifespans and medical costs have increased out of control. A single payer system ala Canada or Europe would be the obvious solution, but people here aren't smart enough to do the obvious.

bgamall4 says

I know a lot of companies are practicing off balance sheet banking,

Again what is this fabled "off balance sheet banking" ?

bgamall4 says

I don't know if Netflix is or is not upfront. I do know that lots of people were afraid to invest in the company because it did off balance sheet accounting.

As I have pointed already.. it isnt off Balance Sheet accounting. They made a commitement to purchase some movies in the future. The same goes for their operating leases which are not capitalized.

The stock tanked because it was viewed by the market Netflix overpaid for future film rights. These purchases for future movie titles have not yet been released nor has their been any liabilties incurred on Netflix part. For all purposed it was propertly disclosed and not hidden.

bgamall4 says

Netflix is much different than the banks. Read this about Basel 2 and conduits and sivs:
http://www.crmpolicygroup.org/docs/CRMPG-III-Sec-II.pdf

So far you havent given any examples of off balance sheet banking. IFRS, isnt the savior the link indicates. Our current US Gaap is heavily based on rules and governed by PACOB/SEC. IFRS principles are very loose in applying standards and may wouldl not be regulated by the US government or agency, but by a foreign agency.

Second, if you have problems reading US Financials, IFRS isnt going to make it any easier.

Netflix's problem was the people it got involved with. They put the Starz and other things on there and got their asses burnt. Not the recorded Starz but the Live Starz. They do that if you pay attention they have cable on there. They did that in the beginning of the online. Paid way to much. For way to little and it keeps getting smaller. What really should be done more and if they want more. Hey no problem I would do that for more current stuff. WTF do I have to pay the post office? The post office is obviously doing greece no fucking good at all.

So Xfinity comes along and says greece your sucking wind now. Which probably means they have postal hoarding syndrome.

The big question is whats the difference if it's cable or online movies? Cable just might dissapear the way of broadcast if that ever occured.

Look lets just forget postal fee's. Put it online. You can send flashbangs and smoke grenades to greece. Then we can get BLOCKBUSTER online. Everyone goes ooooooh aaaaaaaaaaw. Thats what we really want. Sorry to many long term leases wait your turn. Not to mention franchise fees, lawsuits etc. Hey we could all pay at the store closest to us! Now that might work. Cause downloading movies that are ripped I don't like doing. Tell you why many aren't defragged and have junk in them and screw up your computer. Not to mention the blu ray stuff that well travels at blazing speeds of well 500k or some other megabyte. I still can't figure it out it says really fast it just dosen't seem to work that way. Someones on the backbone it sure ain't the common guy. Well get internet download manager nothing will screw your computer quicker than that.

Enough about computers. What we need are current within 3 to 4 years movies online. Not ripped. But on something like Netflix or something else similar. Guys to tell you the truth it's really stupid in most cases to wait for the post office to deliver a movie. There are some that don't have Ripoffband. However it does move fast enough to deliver a movie. You can really thank however the apple OS for that one. IE it says it goes 50 mb a second but it sure don't look that way to me.

Here's a quick snapshot of what's on the market in my area right now.

Not sure what typical HH income is around here, if I had to guess it's probably around $100k/year.

Want prices to come down? Make buyers put 20% down.

20% of $200k is $40k
20% of $300k is $60k
20% of $400k is $80k

Tell people they need to bring that much cash to the table, and prices will drop real quick.

This government supported 3.5% down policy is helping keeping prices high.

EastCoastBubbleBoy says

This government supported 3.5% down policy is helping keeping prices high.

to a great extent, yes, but since people qualify for loans based on the principal, higher down payments will over time result in higher home prices.

$300,000 at 3.5% down has a monthly payment of ~$1750. At 20% down, that monthly payment can buy a $400,000 house. In theory, home prices will just inflate the amount of the down payment.

If we were serious about lowering the cost of housing, we'd eject the parasitical specuvestors from the market. Let them put their money towards actual productive enterprise, not the naked rent-seeking of a landlord.

cc0 says

However, Social Security doesn't promise a positive rate of return.

Absolutely false. Here is an analysis of the rate of return from Social Security. You get the best return if you are married:

http://www.angrybearblog.com/2009/03/social-security-return-on-investment.html

I suspect you aren't familiar with the input and output formulas for Social Security.

tatupu70 says

You obviously didn't understand. SS isn't designed for constantly increasing population, nor does it have to be. It is designed for a steady state of population. Unfortunately, science is allowing people to live longer which makes it tricky to balance the inflows and outflows. But it most definitely does NOT require a increasing population. That's why it is completely different than a Ponzi.

Exactly.

ArtimusMaxtor says

Netflix's problem was the people it got involved with. They put the Starz and other things on there and got their asses burnt. Not the recorded Starz but the Live Starz. They do that if you pay attention they have cable on there. They did that in the beginning of the online. Paid way to much.

I think you have this exactly wrong -- it's the opposite of this. Netflix didn't pay enough for Starz, so Starz didn't make much off the deal. However, it was a good start for Netflix's streaming business, which started collecting steam and more and more people joined because Netflix started getting more and more streaming content. Then Starz and other content producers realized they weren't making enough and raised the fees for Netflix. That's why Netflix raised the fees on users. Now, some of the content producers have either pulled their content, charged more for it, or only put limited amounts up (e.g. only library content, but not current season or last season or two).

corntrollio says

cc0 says

However, Social Security doesn't promise a positive rate of return.

Absolutely false.

Well, gee. SS was sold as a form of insurance. I did not realize that the system promised that every investor would earn more than they paid in. If that's the case, then it is more like a Ponzi Scheme than I thought.

tatupu70 says

You obviously didn't understand. SS isn't designed for constantly increasing population, nor does it have to be.

Actually, I do understand. I just got carried away at the end. The first half of my statement still applies.

tatupu70 says

What the heck are you talking about? Yes, banks offer a positive rate of return on deposits. That has nothing to do with Keynes or a Ponzi scheme.

It's really quite simple. In order for everyone to make money above their deposits, more money has to constantly flow into the system. Eventually, all the world's money is "invested" and the program can no longer maintain that promise. The only system that can pull off that feat is our banking system, but only because it gets to print its own money.

cc0 says

Actually, I do understand. I just got carried away at the end. The first half of my statement still applies.

No it doesn't.

cc0 says

It's really quite simple. In order for everyone to make money above their deposits, more money has to constantly flow into the system. Eventually, all the world's money is "invested" and the program can no longer maintain that promise. The only system that can pull off that feat is our banking system, but only because it gets to print its own money.

There are so many things wrong with that statement, I don't know where to begin.

cc0 says

Well, gee. SS was sold as a form of insurance. I did not realize that the system promised that every investor would earn more than they paid in. If that's the case, then it is more like a Ponzi Scheme than I thought.

That makes no sense. When I buy an annuity, it pays more than I paid in too. Does that mean insurance is all a Ponzi?

corntrollio says

That makes no sense. When I buy an annuity, it pays more than I paid in too. Does that mean insurance is all a Ponzi?

Maybe. It's certainly a fraud. And I've said "like Ponzi", not "is Ponzi".

My finance guy somewhat recently told me about some financial product - I think it was an annuity - with some ridiculously high guaranteed return. I forget the exact details but I asked him how such a guarantee was possible and he said he had no idea, and admitted that it sounded shady.

In the U.S. you couldn't even buy annuities before 1912 and from a brief read about them they started out as government devices, backed by the power of tax. Insurance annuities have the pricing power of the premiums, but they are nonetheless voluntary.

It also looks like if you die any survivors only get either (a) the amount invested or (b) the amount invested plus interest, depending on the annuity type. Neither is guaranteeing/promising that all participants will actuarially receive more than they paid in.

Did AIG sell annuities? What would have happened to those holders had the company been allowed to go bankrupt and receive no government bailout?

cc0 says

My finance guy somewhat recently told me about some financial product - I think it was an annuity - with some ridiculously high guaranteed return. I forget the exact details but I asked him how such a guarantee was possible and he said he had no idea, and admitted that it sounded shady.

That's because you were talking to a salesman probably. If someone can't explain what a product is to you in terms where you can understand it, you probably shouldn't be buying it. It probably also has high fees.

But if you want to find out how, say, a variable universal life policy works, I did a write-up about it: http://patrick.net/?p=816374

But that doesn't mean an annuity is a Ponzi scheme or that it's fraudulent. You either don't know what "Ponzi scheme" means, don't know what "insurance" means, or something else is awry here if you're saying that. I'm also not sure if you understand how Social Security works -- you aren't saying anything substantive that's wrong with it, but rather repeating Rick Perry's talking points.

cc0 says

n the U.S. you couldn't even buy annuities before 1912

The fact that you probably Googled "annuity" before making this post (and found a savewealth.com article) says a lot...

corntrollio says

If someone can't explain what a product is to you in terms where you can understand it, you probably shouldn't be buying it. It probably also has high fees.

I certainly didn't buy it. I didn't even ask for more details. Someone tells me I can get a guaranteed 18% YoY and I say "only in Zimbabwe".

corntrollio says

But that doesn't mean an annuity is a Ponzi scheme or that it's fraudulent.

I said that insurance was a fraud.

http://dd.pangyre.org/i/insurance.html

corntrollio says

[...] Social Security works -- you aren't saying anything substantive that's wrong with it

I've also said that Social Security isn't the problem, but Medicare is. Social Security, despite being called an insurance program or an entitlement, is just a tax. Get rid of it and replace it with welfare.

corntrollio says

Googled "annuity" before making this post (and found a savewealth.com article)

I didn't research it much, but I prefer to understand the history behind something more than its immediate market impact. That article appears to have the date wrong - 1812 is correct, if this site is to be believed:

http://www.annuity-insurers.org/Resources/History/History-of-annuities.aspx

The primary benefits I've seen of annuities are their tax savings, and yes, aside from listening to Ed Slott, I've not any experience with them.

cc0 says

Social Security, despite being called an insurance program or an entitlement, is just a tax.

It is an insurance program. It is neither structured as an entitlement nor a straight tax. There are technical definitions for each of these things.

cc0 says

I said that insurance was a fraud.

That would be a minority position not supported by the law.

cc0 says

I certainly didn't buy it. I didn't even ask for more details. Someone tells me I can get a guaranteed 18% YoY and I say "only in Zimbabwe".

If someone told you 18% (I doubt they did), you should probably report them to some authority. However, insurance plans can be structured in a variety of ways. I explained variable universal life, which at first glance can look appealing to many people, but it tends to have very high fees in most forms.

corntrollio says

If someone told you 18%, you should probably report them to some authority.

Why would I do that? Maybe the number was 16%. Maybe it was 12%.

Why would it make a difference if the guarantee was 4% or 400%?

cc0 says

Why would I do that? Maybe the number was 16%. Maybe it was 12%.

Because if they are guaranteeing you 12% YOY, they are probably a crook. It's not even close to plausible.

I was listening to the radio and I noticed someone (the Feds I think) was advertising "Having trouble making your mortgage payments? Help is available! Visit http://www.makinghomeaffordable.gov

So if you check out that link they want to keep everyone in thier home at taxpayer expense.

Who should we thank more for 'making home UNaffordable'? the D or the R?

They are even spending millions in your taxes to reach out to deadbeats to HELP THEM stay in homes they cant afford via Radio Ads.

Everyone at every level of the government/democrats are trying to re inflate house prices on taxpayer dime. IM REALLY TIRED OF THIS. We know its to bailout BANKS and they stupid loan owners are on the hook for a recourse mortgage on an underwater house if they actually Refi. Then they are screwed for sure until the BK. The banks sure do own the gov