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SoftShell says

We are neither in a recession nor depression. But rather several regressions in succession before an election in a direction that will most likely cause an erection deemed a transgression of natural selection .
Or we could be entering a boom cycle.

Poetry Slam on Patrick.net!

Where is the depression? It's always sunny in sunny OC.

http://www.ocregister.com/articles/home-371359-price-market.html

Raw says

Where is the depression? It's always sunny in sunny OC.

You're thinking of Philadelphia.

I wouldn't call this a depression, I'd call it a lengthy recession with bouts of stagflation.

And, in the next 4 month after that, the 1-year went to 1100 basis points. So, that's almost a 30x increase in just 8 months.

Oh noes, another Duck Duck Goose fight!

There's the hyperinflationist camp. I tend to think it won't happen: the aristocracy/plutocracy doesn't benefit if those whole system crashes. Nobody does.

There's the deflationist camp. I tend to think it won't happen: the FED won't allow deflation since it's believed to be bad (everyone just hoards cash). If the FED has to print money to avoid deflation, it will do it, and that's a good thing.

Then there's the "simultaneous hyperinflation AND destructive deflation" camp. Which is crazy. How can you have both inflation and deflation at the same time? Sure, any given asset can go up/down relative to the average, but inflation/deflation is talking about *overall* prices.

Was 1965 - 1982 hyperinflation ?

According to http://www.dollartimes.com/calculators/inflation.htm,

one dollar in 1965 had the buying power of $3 in 1982.

This was not your ordinary 17 year period.

I believe that the powers that be would like to inflate again - but that it will be tricky because of downward pressure on wages from other countries. WE're in a very tough situation, given the fact that our economic growth (domestically), when it occurs, is based largely on consumption.

marcus says

WE're in a very tough situation, given the fact that our economic growth (domestically), when it occurs, is based largely on consumption.

Agree. That's why "Reaganomics" won't get us out of this mess.

freak80 says

If the FED has to print money to avoid deflation, it will do it, and that's a good thing.

The FED has to print money to avoid deflation, no if here. It has to print a LOT of money just to avoid deflation. It just added a new $40B/month money printing program because it could not avoid deflation w/o it. In fact for the last 4 years the FED prints much more money than is destroyed by loan repayments/failures.

The problem is that neither the FED nor the US GOV-T can effectively direct printed money. All this printed money supports misallocations of real resourses, thus destroying real economy. As it is today the Keynesian multiplier of recent stimuli and QEs is not only close to 0 (ZERO). It is in fact negative, because buying MBS actually drags resourses from other fields where they are much more productive.

At certain point we will be unable to increase our borrowing that prints all these money. At that point we'll either fail to print all those tens of trillions of $USD in physical notes, which will cause a huge deflation that will destroy most of our perceeved wealth; or we'll succeed in printing them, which will again destroy all our perceeved wealth thru hyperinflation.

Kinda reminds me of what I read about the German hyperinflation, people would rather steal the wheelborrow and leave the piles of worthless money behind.

"Paper money ALWAYS returns to its intrinsic value" Voltaire
[emphasis added]

All is well. Upwards of a quadrillion in derivatives risk. No problem. Faith in fiat never faileth. No danger in hyper-extending leverage on food stuff commodities, because too many people will never be hungry at the same time.

dunnross says

housing is not 100% deflated from the last bubble.

It is about 90% deflated, though. At least nationally:

http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/

dunnross says

Hardly need to look hard. Take the entire peninsula from San Francisco, all the way down to San Jose.

That area is expensive because of the high-paying tech jobs. Locally, anything can happen to RE.

A few years ago western North Dakota was nothing but ghost towns. Now, RE is booming thanks to the Bakken oil play.

RE goes up when there's a flood of money coming in.

That doesn't mean anyone should buy if they can rent something similar for less.

freak80 says

That area is expensive because of the high-paying tech jobs. Locally, anything can happen to RE.

High-paying tech jobs is a myth. We are 12 years past the tech crash, and people are still talking about high-paying tech jobs. Average income in Palo Alto is $52K/year, and people are still talking about high-paying tech jobs. Health care, finance & mining pays much more than tech, these days, but people are still talking about high-paying tech jobs. When will you ever learn?

freak80 says

Now, RE is booming thanks to the Bakken oil play.

So are houses in Bakken more expensive than Palo Alto? Not by a long shot, but, they should, because oil is something people need a lot more than getting an Apple 5 upgrade.

In my own, partially-informed opinion:

George W. Bush and Barack Obama (with TARP and the Stimulus Act) both worked to DELAY a depression.

Greenspan lowered interest rates during the booming in the 90s, instead of raising them. That tossed the Fed into a downward spiral, where they've felt forced to lower rates until they can't anymore (0%).

Credit below 7% for 10 years is distorted. It attracts investment capital away from slow, steady deposits like CDs and Money Market accounts toward weird, crazy stuff like Hedge Funds -- as investors scramble to make their 3% to beat inflation. Normally CDs would easily pay 3%+ under 7% interest rates.

The distorted credit markets and capital flow toward hedge funds are to blame for:

- Oil speculation [runaway gas prices]
- Crop speculation [runaway food prices]
- The '03-'08 housing bubble [runaway house prices]
- Student loan bubble [runaway tuition prices]
- Payday lending cancer

Americans have been burned so badly over the past 10 years, many are cutting back, despite low interest rates. Low interest rates only attract borrowers who shouldn't have borrowed in the first place.

This is a deflationary spiral ... which is happening simultaneously with an "inflation" in fuel and food prices (from bubbles). It's bizarre. I've never seen anything like it.

The only way to fix the problem is to raise interest rates and/or just wait for systemic failure and restructuring... a.k.a GREAT DEPRESSION II. Until then, we're stuck in this sludgy, distorted mess.

Presidents will continue short-sighted policies which further delay the pain. QE2 and QE3 are not about saving the economy -- they are about keeping it afloat temporarily until 2016. Every president from Clinton, to Bush Jr., to Obama is playing hot potato. It's remarkable they've been able to postpone the crash/readjustment for 12 YEARS! But it will come!

dunnross says

So are houses in Bakken more expensive than Palo Alto? Not by a long shot, but, they should,

There's a lot more land open for development in ND than Palo Alto.

dunnross says

because oil is something people need a lot more than getting an Apple 5 upgrade.

True, but people are still waiting in line to buy the iPhone 5. Apple is making money.

freak80 says

There's a lot more land open for development in ND than Palo Alto.

ND is a state. Palo Alto is a city. Let's compare apples to apples here. Palo Alto is a city in California, which is a lot bigger than North Dakota.

dunross,

You've become unhinged.

The issue is supply of land. In ND they can build a new housing development almost anywhere. That's not true in coastal CA.

freak80 says

The issue is supply of land. In ND they can build a new housing development almost anywhere. That's not true in coastal CA.

But this is nothing new. It was the same case back in 1980. Why am I asked to pay 10x more now?

dunnross says

But this is nothing new. It was the same case back in 1980. Why am I asked to pay 10x more now?

Is it 10X more even after inflation? Maybe it is, I don't know. Prices are crazy out there.

You're asked to pay 10x more now because people are standing in line to pay 10x more now. Why? Because demand went up and supply stayed the same. Econ 101.

The demand for a place to live is "inelastic" since you *must* have it. It's not like switching from beef to pork if beef gets too expensive. The supply is also inelastic, because of environmentalist wackos...er...excuse me...land use restrictions. That means big price swings with small changes in demand. Add in speculators and it gets even more volatile.

It's Econ 101.

freak80 says

dunnross says

But this is nothing new. It was the same case back in 1980. Why am I asked to pay 10x more now?

Is it 10X more even after inflation? Maybe it is, I don't know. Prices are crazy out there.

You're asked to pay 10x more now because people are standing in line to pay 10x more now. Why? Because demand went up and supply stayed the same. Econ 101.

The demand for a place to live is "inelastic" since you *must* have it. It's not like switching from beef to pork if beef gets too expensive. The supply is also inelastic, because of environmentalist wackos...er...excuse me...land use restrictions. That means big price swings with small changes in demand. Add in speculators and it gets even more volatile.

It's Econ 101.

And lets not forget the Russian Immigrants. Ain't no place to have some vodka with caviar and herring like in a house in "silicon valley."

freak80 says

You're asked to pay 10x more now because people are standing in line to pay 10x more now. Why? Because demand went up and supply stayed the same. Econ 101.

In Econ 101 they also teach you that demand is at the lowest and supply is at its highest at the bottom of the economic cycle. So, what kind of a bottom is this where demand is so much higher than supply?

robertoaribas says

What you would actually expect at a bottom is supply and demand to be back in equilibrium from having been out of balance with supply greater than demand...

Agree, but if 2012 was really the bottom, and we would have achieved equilibrium, then we wouldn't see people standing in line to pay 10x more than in 1980, now would we?

robertoaribas says

that number is shrinking by 1500 to 2000 a month

And how the heck do you come up with that number?

dunnross says

Like I said before, you pea-brain bulls always need some lame excuse to keep you planted in your froggy pots.

dunnross,

Is that for real? You [are starting to] sound completely nuts.

I can't help but invoke Poe's Law right now. I'm not a "bull" on RE. I'm a happy renter. I rent for the ability to move whenever I want/need to.

I don't blame you for not wanting to pay outrageous prices just for shelter. That's why I don't live on the West Coast or in the Northeast Corridor. I refuse to make someone else rich just because "they got there first." I don't understand why anyone puts up with it, really. Unless they have a very good paying job they cannot get anywhere else.

You should move to some place less expensive. There are plenty of those places. You're living in one of the most expensive areas in the entire country.

ONly because the banks are not filing for foreclosure on all their homes...
Using "foreclosures" as a metric is amateurish and a fools game.

The real measure of the industry is : How many houses are the banks holding on the books..

robertoaribas says

I add this to the fact that Phoenix has roughly 11,000 homes in foreclosure and that number is shrinking by 1500 to 2000 a month

dunnross says

Because manipulation cannot go on forever. Even the Soviet Union fell. Banks and the Fed have been manipulating gold prices since the 80's, but gold has caught up to them. Now gold tells the truth! This will happen with housing too.

So put your money where your mouth is. Cash out your 401k and take investment positions, with lots of leverage, based on those assertions. You'll be rich and make the rest of us look like fools.

SoftShell says

However, I personally know 3 people who stopped paying on their mortgage from 8 to 18 months, with the banks not starting the foreclosure process.

Once extrapolated, a legitimate assumption can be made.

You may be correct concerning foreclosed homes, but one cannot extrapolate data from an anecdotal fallacy, and have that result in "legitimate" assumptions.

For a singular event, I agree.
But three separate events?? ( 3 distinct people not paying on their mortgage )

anecdotal
You used a personal experience or an isolated example instead of a sound argument or compelling evidence.
leo707 says