patrick.net

Bellingham Bill says

Goran_K says

The cure for cancer, new robots, and viable fusion technology, yes that will expand the economy. SSA checks?

we don't actually need to "expand the economy" to get things back in balance.

The top 5% clear 30%+ of the national income.

There's your problem, mate.

SS checks this decade and next are ~$2T pure redistribution if the top 10% pay up on their end of the Greenspan Deal over the next 15-20 years.

Just what the doctor ordered.

All of that money is just going to keep a huge geriatric boomer population (the largest percentage of old timers in U.S history) alive, and off the streets. I'm not sure how that helps your point.

Goran_K says

I'm not sure how that helps your point.

the 95%'s economy needs velocity (spending).

old people need more paid labor, which results in wage income. Every dollar of pension income -- and medicare-paid expenses -- just get passed right into the private economy.

This is going to be a TWO TRILLION PLUS flow into the private economy by 2030.

This dynamic is also why I'm not terribly bearish on Japan. They don't have much of a boomer population (compared to us) but their support burden is going to rise a lot as their working age population declines.

But this "support burden" actually translates into a much tighter job market.

Kevin says

SS taxes at present just take dollars from people who need them (those making under $115k/year or thereabouts) and gives them to people who need them slightly more.

I agree with your other point (that the top 10% needs to kick in the money that's paying down the SSTF) but this wealth-transfer aspect of SSA is sheer elegance.

Payroll taxes are a great way to sequester income for necessities so that we don't use all our disposable incomes to bid up rents and home values.

Regressive taxes come out of rents!

At any rate, the less we tax the masses the more the landlords can jack up their rents, and the more we all just bid up the cost of housing.

I *really* wish I had understood this back in 2001 as the Bush tax cuts were going down, sigh.

Bellingham Bill says

This is going to be a TWO TRILLION PLUS flow into the private economy by 2030.

This dynamic is also why I'm not terribly bearish on Japan. They don't have much of a boomer population (compared to us) but their support burden is going to rise a lot as their working age population declines.

But this "support burden" actually translates into a much tighter job market.

Yes $2T in SSA payments, but many times that lost since many of the boomer population will no longer be working, or very productive. Yes the support structure for those industries may experience some growth, but I don't see how that will stabilize the economy in the theory you have put forth.

Goran_K says

but many times that lost since many of the boomer population will no longer be working,

this is a good thing since Gen Y is just now moving into working age.

If Gen Y is 1982 to 2000 they are aged 12 to 20 right now and they will take over from their parents wrt jobs.

Goran_K says

but I don't see how that will stabilize the economy in the theory you have put forth.

I'm just saying the boomer retirement has some under-appreciated upsides.

If taxes are raised on the lower 95% to cover the rising cost of the boomer support, then, no, it won't be all that hot.

But the top 10% cleared $3.3T in AGI in 2010 and paid $610B in taxes. If we doubled taxes on corporations ($300B) and doubled taxes on the top 10% ($600B) and redirected $300B of our defense outlays into health expansion, we'd have a balanced budget and a much more symmetrical wealth distribution arrangement.

Or we can just print it, LOL. That's the most likely outcome I think. Who needs pain when you've got a printer.

We are not definitely Japan.

But, last 5 years or so, we have been Japan who did not really reckon with problems for last 2 decades. They did it with 90% domestic debt.
So in fact, Japan could do it quite well without foreign debts.
We did it Japan style (not Gangnam Style), only worse is with foreign debts.

It's time now. Are we going to finally reckon with the problem that are worsened last 5 years ?

Are we really NOT Japan ?

Darrell In Phoenix says

Housing demand is at 16 year lows.... and falling.

what a bizarre assertion to make when the baby boom echo peaked exactly 20 years ago!

Population growth overall is slowing -- the population aged 25 to 64 grew ~20% in the 1980s but only 11% in the 2000s and will "only" grow 6% in this decade, but that's still growth, LOL.

Here in my Realtor Realityâ„¢ the population of age 25-34 yos grew 14% in the 1980s, actually fell 8% in the 1990s, grew 5% in the 2000s, and is going to grow 9% this decade, 2% in the 2020s, and 8-9% (per-decade) again in the 2030-2050 period.

Listening to Schiff?

LOL

Darrell In Phoenix says

Housing Demand is at 16 year lows

Do you have a link for that?

Darrell In Phoenix says

Wait a second.

Your my pet project, why ignore you.

Link, please.

Darrell In Phoenix says

little troll

Link.

You either have a link to support your absurd assertion, or go away.

You've once again mirepresented what I've said, so I'll probably want a link for that also.

The Professor says

Ignore him or ignore him.

Oh, alrighty.

David Losh says

Darrell In Phoenix says

Housing Demand is at 16 year lows

Do you have a link for that?

Darrel doesn't do links - he just says.

Bellingham Bill says

this is a good thing since Gen Y is just now moving into working age.

If Gen Y is 1982 to 2000 they are aged 12 to 20 right now and they will take over from their parents wrt jobs.

I'm sorry but that theory doesn't make any sense. The retiring boomers are leaving behind mid-level to senior positions, Gen Y isn't going to be able to just walk into these jobs and take over. They are trying to get entry level positions, unfortunately, many of these jobs (if you keep up with hiring forecast) simply aren't there. Either more experienced mid-level types in their 30s and 40s are taking them, or the positions don't even exist anymore as many of them have been shipped over seas. It's one of the biggest worries for new grads these days, and more and more of them are simply not entering the job market and either 1) going back to school, or 2) moving back home and taking partial employment.

I do agree that the boomer retirement saga will have many upsides (as they die off, we can finally have some form of austerity instead of hegemonic cold war era entitlement), but SSA checks bolstering the economy just seems like a huge stretch to me.

Goran_K says

The retiring boomers are leaving behind mid-level to senior positions, Gen Y isn't going to be able to just walk into these jobs and take over.

of course not, but every hole at the top will leave a hole at the bottom as people move up.

Goran_K says

or the positions don't even exist anymore as many of them have been shipped over seas

sure, that's a problem, but that's orthogonal to the baby boom retiring en masse as they are starting to now. There were 4 MILLION boomers born every year during the boom years of 1952-1964.

http://www.infoplease.com/ipa/A0005067.html

Goran_K says

but SSA checks bolstering the economy just seems like a huge stretch to me.

it's going to be a nice tailwind, that's all. Kinda like "helicopter money". The boomers have been allegedly saving for decades, and now they finally get to spend their money!

The more this spending is being funded from the top 5-10%, the better net stimulus it will be. Hell, we can probably even print some of it if we need to. . .

Bellingham Bill says

The more this spending is being funded from the top 5-10%, the better net stimulus it will be. Hell, we can probably even print some of it if we need to. . .

It's just not going to happen. Printing money to support a SS short fall with a little socialism thrown in for flavor? I honestly hope you're not being serious.

IDK about you all but I think we are not looking at a "crash" as much as a continued reditribution of wealth from those who work to those who own. That's what the QE's have been all about and the bailouts also. We were looking at a crash in 2007 but the governing monied class took a housing market problem and turned it into a national change of direction. I don't see how this ends well unless American workers - those "in the arena" to refer to Roosevelt - start taking the country back. I didn't watch the video because I really don't have time to sit through videos when I can read the article in a minute or two. But, some points from the discussion:
1. government lowered the flourine amounts in water last year so reproduction should increase
2. no reason to replace a retiree with someone at the same pay band. In my generation, 40-somethings, I commonly see people doing the same job as their predecessor for significantly less pay.
3. We could have a crash but what we will see is a change. E.g. my neighbors in our middle class $80K household income neighborhood regularly shop at GoodWill, DollarGeneral, Aldi, and the Farmer's Market. Going and gone are the days of Sharper Image, Restoration Hardware, and Whole Foods. Maybe some people can afford them. Plus lots of sells/trades with neighbors including formal things ranging from neighborhood-wide yard sales to mother's club sales and such.
4. The retirees I personally know are NOT at all sitting on a cash pile. They are living on nearly the tightest budgets the ever have.

maxweber21 says

...$180K household income neighborhood regularly shop at GoodWill, DollarGeneral, Aldi, and the Farmer's Market.

Spot the odd one out.

Bigsby says

maxweber21 says

...$180K household income neighborhood regularly shop at GoodWill, DollarGeneral, Aldi, and the Farmer's Market.

Spot the odd one out.

Thanks!. Yep, was supposed to be $80K. typo. fixed. Thanks.

http://www.usa.com/28278-nc-income-and-careers.htm

maxweber21 says

Bigsby says

maxweber21 says

...$180K household income neighborhood regularly shop at GoodWill, DollarGeneral, Aldi, and the Farmer's Market.

Spot the odd one out.

Thanks!. Yep, was supposed to be $80K. typo. fixed. Thanks.

http://www.usa.com/28278-nc-income-and-careers.htm

That wasn't actually what I was referring to.

Everything we think we know about the economy right now. Is only a symptom of bad economic policy from the FED. Change one, changes the other.

Bigsby says

maxweber21 says

Bigsby says

maxweber21 says

...$180K household income neighborhood regularly shop at GoodWill, DollarGeneral, Aldi, and the Farmer's Market.

Spot the odd one out.

Thanks!. Yep, was supposed to be $80K. typo. fixed. Thanks.

http://www.usa.com/28278-nc-income-and-careers.htm

That wasn't actually what I was referring to.

Oh. Not sure I know which one is odd. Which one? The Farmer's Market here is price competitive. By no means is it a clear price winner unless you are trying to buy grassfed beef or other healthy products. For those, it slaughters the price of WholeFoods or Earth Fare. Aldi has best prices for some boxed goods. Dollar General has best prices for some clothes (e.g. socks), some foods (DollarTree is even better), paper products (paper towels, toilet paper), etc. You can spend up to twice as much on your weekly food bill. (I know, if times were really tough then people would use rags instead of paper towels. Of course times are not tough for most Americans yet. They are trending that way though.)
$84K agerage HH income as of 2010: http://www.zipdatamaps.com/28278

Well, there's nothing bargain basement about the farmers' markets in the Monterey area.

maxweber21 says

The retirees I personally know are NOT at all sitting on a cash pile. They are living on nearly the tightest budgets the ever have.

This is true. 60% of boomers think they will have to work past the age of 70!!! Incredible, really.

Also, considering that the as far back as 1994, the Clinton/Greenspan combo staunchly and successfully opposed tougher regulation on derivatives which effectively proved to be a great catalyst for the housing bubble, I'd say stupidity crosses party lines.

underwaterman says

've followed Schiff since 2009 and come to realize the guy is just an arrogant businessman. I called in 2010 into his business looking to put IRA money into gold. The person wouldn't talk to me unless I had 250k.

250K is often a standard minimum limit for hedge funds. Also 250K is really not that much considering it gets you a garage in the bay area and people have no problems bidding up their "dream home" into the millions because house prices can only go up.

mell says

if rates rise.

You mean "when rates rise". Momma only has so much free money in that purse. Even in today's shell game economics, there will be accountability. Wait for it...

bgamall4 says

Schiff brags about being in the 1 percent, yet his 1 percent cronies are ruining America.

It takes two to to tango. If you look at last election, almost 100% voted for either Obama or Romney which is basically a continuation of the cheap credit policies benefiting those who already have huge leverage. The lambs keep bringing themselves to the slaughterhouse.

bgamall4 says

House prices must decline to keep track with wages. Unless private equity wants to be in the landlord business for years and years

This is one of the things I am most interested in. How long will these major firms be willing to be "landlords" renting out shelter in low-end neighborhoods in the Sacramento burbs. I've already seen smaller firms exit the market, but maybe these major firms have more metal to keep going (aka cash).

bgamall4 says

Obama=lesser of two evils. Nothing more.

He still doesn't have a clue though. Obama is still operating under the misguided principal that home prices must rise (probably the same mentality that made him a bubble buyer in 2005).

So he may be the 'lesser' of two evils, but his underlying policy is still totally misguided, and completely wrong for fixing the housing market.

Ron Paul had the best strategy for fixing the economy in recent memory, and early polls showed that he had the best chance of beating Obama (conversely, Romney has always been shown to be a loser against Obama in any opinion poll).

It's a shame that Ron Paul was basically silenced by the media and swept aside. He was the only one who had a clue during the national debates.

bgamall4 says

Ron Paul has some good ideas mixed in with some dreadful ideas. Libertarians believe in two failed ideas. One is they want racism to be a civil right, and some are just racist. Second, they believe the invisible hand of self interest will help society more than regulation. Turns out that in the housing bubble and crash that was proven false. Even Max Keiser thinks his libertarian friends are nuts for not wanting banking regulation.

Not sure why you believe libertarians are racist.

On the second note, if the Banks had been forced to eat their own medicine, then the idea actually would have worked in practice. Just like any private sector business, if you build losses, there is a natural free market reaction to your actions; you go out of business. Unfortunately, Obama gave them a safety net, so of course they can operate like criminals in a deregulated environment.

underwaterman says

I think it is safe to assume version 2 where they now swoop in to buy the very foreclosed homes they caused in version 1 will not end well either, especially for the neighborhoods where they are concentrating like phoenix and atlanta. What happens when those homes depreciate and the rents fall? One guess. They are not going to stick around like a homeowner and try and make it work. They are going to dump the houses or abandon them and their shell LLCs just like they are doing now in foreclosures and blight communities.

That's actually what I am waiting for. Housing is so volatile right now that in one year you can have a 5% YOY gain, and the next a 7% YOY loss. These major firms are very performance oriented (I used to work directly face-to-face with them). If the market forces any sort of correction downward, I could see them exiting the market very quickly, and leaving the mom-and-pop speculators with the highest losses.

You're taking the actions of individuals and applying it to an entire philosophy. Rush Limbaugh once said that "all criminals resemble Jesse Jackson". Rush Limbaugh claims to be a Christian.

Does that mean a core belief of Republicans and Christians is that black people are criminals? That's a ridiculous connection to make just like your assumption that all Libertarians are racist because of something Schiff said.

(also you took what Schiff said completely out of context, but we'll get to that later if you want to push the subject)

If you actually understood Libertarian doctrine, you would know that they genuinely see racism as a belief system that expresses itself only in the form of coercive government power. State-enforced discrimination is the only kind of discrimination. A libertarian by definition opposes discrimination because libertarians oppose the state. Racism is NOT a core belief of Libertarians. It works both ways, while they believe that the state should not enforce discrimination, they also believe that anti-discrimination movements like "affirmative action" should also be opposed (more of what Schiff was talking about).

Of course reactionary people often jump to conclusions about things they don't completely understand.

bgamall4 says

I wrote an ebook about libertarianism. The concept of voluntary relationships is similar to Ayn Rand's philosophy.

Yes, the only racism these perverts see is quotas. Racism as a civil right is a core belief of libertarianism. Racism like that of Rothbard may not be. But libertarianism attracts a lot of racist misfits because it allows for racism to be a civil right.

If it isn't racist to do so it is wacko. Libertarianism is wacko. That is the conclusion I come up with in my ebook. I have too many examples of libertarian leaders proving their wackiness.

It's not about quotas. Damn it, I hope you're kidding that you actually wrote a book about libertarians because you seem to misunderstand the very basics of the doctrine.

It's NOT about quotas. It IS about state enforced discrimination, and anti-discrimination. That is all. Anything else you have misunderstood on top is an addition to the doctrine that you have made in your own mind that doesn't exist. Ron Paul doesn't go around telling people to hate blacks and not do business with them. In fact one of his biggest supporting blocks was African Americans.

You yourself practice discrimination in your own life. Do you let pedophiles play with your kids? Do you want your family hanging out with gang members and drug dealers? No, you discriminate because you have a choice. What if the state enforced a quota that your neighborhood must allow at least 10% of the housing to be available for released pedophiles? I don't think you would really agree with that, and neither would libertarians.

Sure, some wacko could say "I don't want to serve blacks in my establishment", but that business person also gets the free market punishment of losing business from all black people, and those who sympathize with black people. They would soon go out of business because they tried to enact a faulty business model.

Conversely, saying someone should get into a top state school, even with lower scores than someone of a more represented race, to fill a quota, is a form of state enforced racism. The state is giving an opportunity to someone (and taking away one) simply based on the color of their skin and not merit.

$350,000 @ 6% is a $2300 all-in (PITI etc) outgo.

At 3% this payment pays off a ~$400,000 purchase.

Alternatively, looking at PITI less the P, I get:

$350,000 @ 6% is a $2000/mo cost of ownership, and $2000 @ 3% can support ~$500,000's debt service.

This latter case requires principal repayments to transfer into solid equity that doesn't disappear if & when interest rates go back up or other macro changes that affect valuations.

Thing is, there was a disconnect between Fed policy 2004-2006 and the housing market.

The Fed began raising interest rates in mid-2004, but the boom went on for another full year, and prices stabilized at the 2005 level for another year or so (the summer of 2006 was the beginning of the bust).

The Fed certainly caused the boom of 2002-2004. But the bubble of 2004-2006 was something else -- the suicide lending of teaser-rate 2 year ARMs, negative-am "pay option" loans, and outright fraud of people buying with no visible means of being able to pay other than future equity withdrawal.

THAT was the bubble of 2004-2006, not the Fed, and why the market crashed in 2007.

http://research.stlouisfed.org/fred2/graph/?g=d9j

shows the Fed fighting rising prices in 1999-2000, giving up in 2001, then letting their freak flag fly in 2002-2003.

The resulting tightening of 2006-2007 wasn't dramatic enough to cause the crash.

bgamall4 says

Goran_K says

You yourself practice discrimination in your own life.

The more you write the more you prove my case. I try to avoid racial discrimination, however, you have the right to practice it in PRIVATE. The libertarians want the ability to practice it in PUBLIC BUSINESS.

That is unlawful and it should stay that way.

The freedom to discriminate/disassociate is eroding fast. Private clubs are being bombarded with hate when they discriminate. Business owners advocating marriage to stay between man and woman only as their PRIVATE opinion are being told by crony politicians that they are not welcome in "their" city and zoning and other laws are used to prevent the business. I may not agree with their views but I think a business owner should be able to convert his business into a "private club" with member fees and discriminate however the see fit. You see any ugly bitchez at hooters? Any old grannies? Any gay men serving your chicken wings? Don't think so. Furthermore there are tons of armchair liberals/progressives that hate every homophobic soul out there but as soon as their daughter starts dating a black guy (if they are white or vice versa) or an affordable housing project is announced in their neighborhood or next to their kids school, then all the tolerance goes out of the window instantly. I'd rather have a slightly homophobic pal who is honest about it (and I would likely debate him) than one of those armchair good-doers. Also, just because somebody advocates something fairly extreme like Schiff advocating extreme freedom for the business owner doesn't mean they themselves are racist or support racism, it just means that some principle in their political views is so strong that they cannot advocate prohibiting freedoms that could be abused because it would directly collide with their principles. For example you could be an advocate for welfare although you know that at any given amount of time there will be X amount of people who totally abuse the system because the alternative of no safety net for those in real need seems worse to you.

Kevin says

They'll stay for an average of 17 years (according to what I found googling it), and won't really be that concerned about resale.

I suspect you're way off the mark with that figure.

17 years is extremely off the mark, by over a decade.

Yes, I hope those people keep putting their money into an over priced home they are barely hanging onto. Debt servitude should teach them a good lesson over the next 10 years or so.