patrick.net

Logan Mohtashami says

See I knew deep inside you agreed with me that home prices are too high ( from an old article)

Yeah, right, 2005...
You obviously don't agree that prices home prices are too high now since you don't believe that more supply is needed.

Heraclitusstudent says

Yeah, right, 2005...

You obviously don't agree that prices home prices are too high now since you don't believe that more supply is needed.

You have to remember with me I remember everything
Here are 2 articles saying Let the zombie homes just die... it would bring in more supply of homes for the market place.
We can do this dance all day long but you will never get the clip over me, because my model is always consistent

Because I can't hide behind a fake name or fake photo, everything I write on the net gets recorded at read

March 2012 ( Distress Supply To The Market)

Zombie Homes Last Stand

http://loganmohtashami.com/2012/03/09/housing-zombies-last-stand/

Nov 2011

Let foreclosure happens

http://www.benzinga.com/personal-finance/11/11/2097197/let-foreclosures-happen

We didn't due to legal constraints and the fact that many homes were under water and not enough equity to sell

But still today 3.6 million homes in distress, most are all from the housing bubble

it would create 10 months supply of homes for the market place

Logan Mohtashami says

Here are 2 articles saying Let the zombie homes just die... it would bring in more supply of homes for the market place.

...And more people in the rental bucket.

Yes, you're a real Robin Hood: lending only to the rich and letting the poor rent.

I guess it doesn't matter to you if families of 4 live in 1 bedroom apts, as long as you are in the top 40 under 40 or whatever.

Heraclitusstudent says

...And more people in the rental bucket.

Yes, you're a real Robin Hood: lending only to the rich and letting the poor rent.

I guess it doesn't matter to you if families of 4 live in 1 bedroom apts, as long as you are in the top 40 under 40 or whatever.

Now you're just speaking for the sake of speaking, this is not behavior of a engineer, this is more emotional talk

I have written in fact that home prices are too high you deny it

I have written in fact that I don't want poor people to get debt that they don't want and you seem to be against that

Poor people should never ever have debt they can't handle, period.

I forecast ed this back in Dec of 2011

Consequences of an unstable market.

"The longer term consequences of an unstable residential real estate market may be more serious than just the destruction of individual wealth. The ideal of middle class home ownership may be at stake. The census bureau reported a 7% decline in national rental vacancy rates in 2010, along with an overall decline 0.7% in home ownership rates compared to a year ago. There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners?"

I can't bend the mathematical model for your liking

I am truly sorry for this, this is about economics more than anything. However, there will never be a day that I would advocate lending debt to poor people who can't handle the payment. This is a cardinal economic sin and a awful Malice that would plague these poor Americans in their life.

I can't advocate this ever.

Logan Mohtashami says

I have written in fact that home prices are too high you deny it

You've denied the obvious fact that more supply would lower prices.
And you keep saying things like "this isn't about home prices".
Tell that to the families of 4 living in a 1 bedroom.

Logan Mohtashami says

There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners?"

This amounts to a lender whining that there aren't more good customers.

We can continue this all day, but you can't escape the fact that you are on the profiting side of an evil scheme that robs people from their quality of life.

Heraclitusstudent says

You've denied the obvious fact that more supply would lower prices.

You don't read what I am saying and for that you always miss my point. I can't force you to read, so I will let that pass

Heraclitusstudent says

This amounts to a lender whining that there aren't more good customers.

United States Federal Government has set in place standards to allow debt to not be given to those who can't obtain it. This is a positive step for housing.

The system will not be corrupted again because we have numbers in place now that needs to be verified and the bar is still low

VA loans 0% down 620 fico 60% DTI
FHA 3.5% down 560-620 fico score 43% DTI up to 50% in some cases
GSE 3% down 620 Fico score up to 50% DTI

These aren't very strict metrics to own a home. The United States government and CFPB has set into place laws in preventing debt been given to poor people
this is a positive not a negative

Heraclitusstudent says

We can continue this all day, but you can't escape the fact that you are on the profiting side of an evil scheme that robs people from their quality of life.

Have a good day and good weekend sir.

Logan Mohtashami says

You don't read what I am saying and for that you always miss my point. I can't force you to read, so I will let that pass

I read exactly what you wrote. Rich people... cash... blah blah blah... It should occur to you the money you lend has to go somewhere.

If you agree with it, just say it: "more supply would help lower prices". Here you just have to cut and paste.

Otherwise don't pretend you're unhappy prices are high. You're just unhappy people are buying without mortgages and others just renting.

Logan Mohtashami says

These aren't very strict metrics to own a home. The United States government and CFPB has set into place laws in preventing debt been given to poor people

this is a positive not a negative

Yeah, too bad prices are so high. Otherwise people could, you know, like, actually buy.

"There is 5 months of supply NOW"

Heraclitusstudent says

You're just unhappy people are buying without mortgages and others just renting.

You're getting too emotional now, show discipline you're all over the place now.

I am making too much profits and I am unhappy at the same time?

Come on you're a engineer fall back to your discipline. Think about what you're saying now, you know better

You're advocating something that led poor Americans to suffer through the great recession and lose their homes.

Giving non owning capacity debt to the worst debt to income ratio Americans. Why would you advocate such a terrible social policy. Thankfully their are promising democrats that won't allow you get your wish such as Elizabeth Warren and Bernie Sanders.

If you have a problem with the United States government for setting new regulations then here is the web site of the consumer financial protection bureau

http://www.consumerfinance.gov/

Add your full name to accept 100% responsibility and file a complaint that poor people aren't getting homes. They are setting the rules if you're oppose to the government regulations then file a complaint

Bellingham Bill says

"There is 5 months of supply NOW"

On a national basis average for an entire year. We did hit 6 months last year at the peak of the housing selling season but it was only for 1 month and for the spring season selling inventory was well over 5 months last year.. so there were homes out there on a national level

Distress homes are still shrinking, even though we do have 3.6 millions in distress and I believe right now 815,000 that are foreclosed and not in market. That market place is shrinking and conventional sales are rising

Logan Mohtashami says

Giving non owning capacity debt to the worst debt to income ratio Americans.

I've advocated no such thing.

Logan Mohtashami says

You're advocating something that led poor Americans to suffer through the great recession and lose their homes.

I'm advocating low prices. Are you claiming that low prices caused people to lose their homes?
You are not making sense.

I do think poor people should rent - and rents would be much lower if there was more units available.

Logan Mohtashami says

You have to stop this BS about inventory being "balanced". The inventory is low.

The months of supply reflects low demand.
Low demand reflects high prices.
High prices reflect lack of availability.

Now say it: "more supply would help lower prices".

Heraclitusstudent says

The months of supply reflects low demand.

Low demand reflects high prices.

High prices reflect lack of availability.

Now say it: "more supply would help lower prices".

A lack of a financial background and a lack of working in the housing industry shows right here, clearly

It's not your fault sir because this isn't what you do for a living and you have no housing work experience in knowing that there there is a glut of homes that have been kept off the market places for years ( distress inventory) and that you're using inventory levels with that (red line)that don't represent spring and summer season which the majority of housing activity happens

Number 1 .... and come on did you really think that was going to work on someone who tracks housing data everyday

Move that red line up to seasonal demands time frame... I mean come on, this isn't kindergarten ;-) You're flattening data line in non seasonal demand months
I can't explain how bad that is what your did right there.

Then again, this isn't what you do for a living

Number 2

For the 17th time ( National average of inventory of Months)

Again this doesn't work on me, you're not dealing with a novice

You have to do better than that!

Seasonal strong months on inventory levels has always matter the most since housing data has been created. You can't just delete Spring and Summer for your own good

Logan Mohtashami says

Move that red line up to seasonal demands time frame... I mean come on, this isn't kindergarten ;-)

As you wish...

Oh NO... the inventory is still low...

And your other chart showing a minor variation over a decade low doesn't exactly help either.

Logan Mohtashami says

Then again, this isn't what you do for a living

You're right. I'm not in the business of BSing for a living.

Heraclitusstudent says

You're right. I'm not in the business of BSing for a living.

I can't believe this, you just did it again. This is my fault I am doing a good job here of teaching you this

You see that red line... move it up to the peak as strong seasonal data for demand and inventory matter. Right now you're the first person ever that I know that isn't not accounting for peak seasonal demand and inventory. This is a new one

Also, please tell me how many homes are in distress or not in inventory today due to state and federal regulation. I am sure you have the exact breakdown like I have right here.

Please let me know, sir

Let me help you not because I track this data monthly

Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure: 1,701,000

Number of properties that are 90 or more days delinquent, but not in foreclosure: 1,112,000

Number of properties in foreclosure pre-sale inventory: 815,000

Total of 3,628,000

Now legally nothing can be done on the 30-90 days due to legal contract regulation even if they were loan mod re default which I am sure you're well aware of

But the last 2 total of 1,927,000

Whoaaa... not there is some supply of homes right there

However, robo signing act , Homeowners Bill of Rights Act, State judicial laws prevents these homes from going on the market in a timely fashion. Yes, I realize that many people benefited from living in there home cost free for years.

However, there is your supply. Now years ago this number was well north of 7 million homes so things are getting better in terms of these homes coming to market.

However, that is a lot supply.

Now my 2011 and 2012 article if in case you read them calls for a better process to get more supply to the market place because that is what is needed because as I always have stated home prices are rising in a disconnection to main street. Which I will add here just in case if you didn't read it above

Home prices are too damn high!

The term “housing recovery” suggests that home prices are now “returning to normal”. In truth however, prices are rising beyond economic reality of most Americans. While home owners and housing pundits alike were glad to see the return of home values to nearly pre-recession levels in some areas, nary a thought was given to how to how this would impact demand. Prices were up 15%-45% in 2 years — the biggest 2 year expansion we have seen outside the bubble years. While we are seeing some price reductions, there really isn’t any meaningful way to get a price correction in the market until inventories increase or there is another a job loss recession. One of the best things that could happen to the housing market would be a major cooling of prices from the crazy pace we have been seeing in the past 2 years. Nevertheless, I expect home prices will continue to show growth for 2014.

http://loganmohtashami.com/2014/05/05/why-the-financial-media-and-housing-pundits-got-it-wrong/

March 2012 ( Distress Supply To The Market)

Zombie Homes Last Stand

http://loganmohtashami.com/2012/03/09/housing-zombies-last-stand/

Nov 2011

Let foreclosure happens

http://www.benzinga.com/personal-finance/11/11/2097197/let-foreclosures-happen

We didn't due to legal constraints and the fact that many homes were under water and not enough equity to sell

But still today 3.6 million homes in distress, most are all from the housing bubble

it would create 10 months supply of homes for the market place

Logan Mohtashami says

move it up to the peak as strong seasonal data for demand and inventory matter.

Yeah, we all see that there is a peak that is low compared to other seasonal peaks in the past decade.
And we all see that there are lows that are also low for the past decade.
In spite of 25 extra millions people in this country.
On what planet does it translate into "balanced" inventory? I don't know.

Give us a break. This is not Bloomberg TV.

Logan Mohtashami says

But still today 3.6 million homes in distress, most are all from the housing bubble

it would create 10 months supply of homes for the market place

there is your supply.

You have to stop this BS argument that amounts to saying that dragging millions of people into the streets would create available housing supply for the rest of the population.

That would certainly not help house the population we have. I really don't know why you keep repeating such crap.

Heraclitusstudent says

You have to stop this BS argument that amounts to saying that dragging millions of people into the streets would create available housing supply for the rest of the population.

That would certainly not help house the population we have. I really don't know why you keep repeating such crap.

That right there is as perfect statement coming from an engineer! God bless your soul, you a good heart, you mean well. It's just your lack of experience in housing shows.

Have a good weekend I will leave you with this because only you would know what it means on this thread

"To be even minded
is the greatest virtue.
Wisdom is to speak
the truth and act
in keeping with its nature.”

Logan Mohtashami says

Heraclitusstudent says

You have to stop this BS argument that amounts to saying that dragging millions of people into the streets would create available housing supply for the rest of the population.

That would certainly not help house the population we have. I really don't know why you keep repeating such crap.

That right there is as perfect statement coming from an engineer!

I guess dragging millions of people into the streets to create available housing supply for the rest of the population does indeed look good for a mortgage banker.
More mortgages - that people actually pay!

Heraclitusstudent says

more supply would help lower prices

I guess admitting that would actually violate the omerta of that mafia you're a part of. Better to kick distressed people on the street, than actually build enough houses for the population we have.

Sir,

When during the 1999-2001 timeframe saw housing prices going up 20-40% for several years in succession, it become obvious that this was not sustainable. Housing prices were going up, and the combination of flat salaries creates a much high loan to salary level.

Now that for years the interest rate was kept low, do you see a bubble like 2007, and do you see a need for housing prices to be restored to a multiplier level compared to salaries, as it was before the inflationary period preceding 2007?

Heraclitusstudent says

I guess admitting that would actually violate the omerta of that mafia you're a part of. Better to kick distressed people on the street, than actually build enough houses for the population we have.

Your emotional spite for me I totally understand, I don't blame you one bit. I mean you hide behind a photo of an owl and have a fake name, it gives you free right to say whatever you like without naming yourself. So, please if it makes you feel any better please go ahead and say whatever else you like. I do understand where it comes from

My term for the group you're talking about and how I would label them is them

EWOMD

Economic weapons of mass destruction

Lending debt to poor people, which I have showed in all my work that I am fighting to prevent. This was created

by

Home grown domestic economic terrorist. That is how I label them and that is why I always taken a stand to never allow debt to be given to poor people who can't handle the payments

Like I said you have good heart and you mean well, but this area isn't where your expertise stand. Have a good weekend sir

Logan Mohtashami says

Giving non owning capacity debt to the worst debt to income ratio Americans. Why would you advocate such a terrible social policy. Thankfully their are promising democrats that won't allow you get your wish such as Elizabeth Warren

Wow you must have a different definition of promising than me.

Remember you are in Orange County that kind of talk will not help your cause.

The one thing I will agree with you on is that the overarching problem is demographics. Actually to be more exact it is the leverage applied to economics that have caused the inbalances that need to be adjusted. Which you cover in a perfunctory way by indicating "debt is the problem".

Technology is not a problem and creates more jobs than it gets rid of.

Math is a good way to look at this, however it is not enough to say it explains the whole picture.

indigenous says

Technology

Helps the higher end income bracket but does a number on manual lower level skill workers

Logan Mohtashami says

Helps the higher end income bracket but does a number on manual lower level skill workers

The trend of technology raising the standard of living has been around since the discovery of fire.

100 or so years ago 90 or so % of the workers were farmers today it is less than 5%, if your assertion were true there would have been massive unemployment ever since.

The division of labor, comparative advantage, and the law of association creates more jobs not less. As evidence I give you the modern economy, I, pencil indicates that not one person on the planet knows how to make a pencil yet they are plentiful and cheap because of comparative advantage without a single bit of government oversight, people from all around the world working in their own self interest yet without any conflict create this product in abundance. And this applies to every single product there is in the world.

No the technology is not the problem.

indigenous says

No the technology is not the problem.

We are going to have to disagree on this, because wages have been weak for a portion of the American workforce because manual labor jobs have taken a hit due to technology

I always fall back to big 4 for a more macro prespective

Globalization
Technology
Debt
Demographics

They have to be taken in it's entirety

Logan Mohtashami says

because wages have been weak for a portion of the American workforce because manual labor jobs have taken a hit due to technology

How do you determine that the cause is technology?

indigenous says

How do you determine that the cause is technology?

Manual labor that is done by technology advances lose wage inflation power over time, but if you look at the top 10 incomes in America technology advances has boosted their wage inflation power, highly skill set labor...medical profession is #1 and #2 in salaries

Logan Mohtashami says

Manual labor that is done by technology advances lose wage inflation power over time, but if you look at the top 10 incomes in America technology advances has boosted their wage inflation power, highly skill set labor...medical profession is #1 and #2 in salaries

Ok but I don't think that is a good analysis because it is dealing with symptoms not causes.

The apparency is what you say. But the reality is that manual labor's jobs have been offshored or domestically have been subsidized.

But what are the true causes?

No small part of it is what I talked about earlier in the dearth of small business investment this because speculation has subjugated small business investment.

Minimum wage encourages business owners to find other way to produce his product such as automation. This is not the whole story but more of a contributing cause than one would think, especially when you consider that minimum wage jobs are how people gain enough experience in the work a day world to move on to a better position. How is the work ethic of the Irvine teenagers?

Off shoring was exacerbated by the floating exchange rate , with the automatic target of 2-3% inflation, starting in 71. This along with the reserve currency status of the dollar has left the US at the mercy of countries that wanted to exploit through mercantilism.

The wage inflation in the medical is obviously demographic as you indicate, but it is more so from government spending on medicare which is the same mechanism as is in the student loan program and in your bailiwick. Because money is available for a college education or healthcare the price keeps going up as per supply and demand. Since this also allows for abuses. It does not have to conform to the market place. IIRC the avg person will realize 7 times the benefit compared to what he paid in, this causes inflation on borrowed money.

As for domestic labor I have to say that when 1/3 of the countries welfare goes to Calif which is about 13% of the population primae facia there is something wrong? Which I would suspect that the immigrant labor is being subsidized which replaces domestic labor.

So would technology have had such an affect if not for the government spending? I doubt it, because the market would have kept it in balance.

and,

http://www.youtube.com/embed/K8E_zMLCRNg

indigenous says

and,

:-) I have limits of discussion time on Friday Nights as wife is not that forgiving but now I can address it

Logan Mohtashami says

but now I can address it

Do tell

indigenous says

. But the reality is that manual labor's jobs have been offshored or domestically have been subsidized.

Globalization indigenous says

Minimum wage encourages business owners to find other way to produce his product such as automation. This is not the whole story but more of a contributing cause than one would think, especially when you consider that minimum wage jobs are how people gain enough experience in the work a day world to move on to a better position. How is the work ethic of the Irvine teenagers?

Technology but most min wage workers are female's and 2nd wage earners

0.08% of all full time jobs are min wage federal level

indigenous says

Off shoring was exacerbated by the floating exchange rate , with the automatic target of 2-3% inflation, starting in 71. This along with the reserve currency status of the dollar has left the US at the mercy of countries that wanted to exploit through mercantilism.

Debt

indigenous says

As for domestic labor I have to say that when 1/3 of the countries welfare goes to Calif which is about 13% of the population primae facia there is something wrong? Which I would suspect that the immigrant labor is being subsidized which replaces domestic labor.

Demographics

indigenous says

but now I can address it

Do tell

We moved from a producing economy to a consumption based service economy.

It's a cook book! economy.. how to serve mankind

What country does well over time that consumers more than it produces

Also, shareholder nation profit to wage gap isn't healthy either for labor

This is just going to grow like crazy, and any recessions after 2022 will make the total debt get bigger since mandatory spending will be matching government revenue years 2024-2054

Logan Mohtashami says

indigenous says

. But the reality is that manual labor's jobs have been offshored or domestically have been subsidized.

Globalization indigenous says

Minimum wage encourages business owners to find other way to produce his product such as automation. This is not the whole story but more of a contributing cause than one would think, especially when you consider that minimum wage jobs are how people gain enough experience in the work a day world to move on to a better position. How is the work ethic of the Irvine teenagers?

Technology but most min wage workers are female's and 2nd wage earners

0.08% of all full time jobs are min wage federal level

Among those paid by the hour, 1.5 million earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.8 million had wages below the federal minimum. Together, these 3.3 million workers with wages at or below the federal minimum made up 4.3 percent of all hourly paid workers.

Thomas Sowell talks a lot about how this has impacted blacks.

Logan Mohtashami says

indigenous says

Off shoring was exacerbated by the floating exchange rate , with the automatic target of 2-3% inflation, starting in 71. This along with the reserve currency status of the dollar has left the US at the mercy of countries that wanted to exploit through mercantilism.

Debt

Yes but debt that did have to be, especially when you consider it is a two fer for the US losing jobs and the damage done to the current account. I suspect also a lot or your customers are trading their dollars for houses?

Logan Mohtashami says

indigenous says

As for domestic labor I have to say that when 1/3 of the countries welfare goes to Calif which is about 13% of the population primae facia there is something wrong? Which I would suspect that the immigrant labor is being subsidized which replaces domestic labor.

Demographics

That does not add up or, in honor of Spock that is not logical. Splain please.

indigenous says

Demographics

That does not add up or, in honor of Spock that is not logical. Splain please.

Older Americans are working longer than they would have normally done, if there ever was normal, taking some jobs and wage inflation away form younger prime working force Americans

Logan Mohtashami says

indigenous says

but now I can address it

Do tell

We moved from a producing economy to a consumption based service economy.

It's a cook book! economy.. how to serve mankind

What country does well over time that consumers more than it produces

Sactly, but the real cause was the floating exchange rate and the inflation and the liability (contrary to popular opinion) of being the reserve currency. But man did not get served up only Americans.

Logan Mohtashami says

Older Americans are working longer than they would have normally done, if there ever was normal, taking some jobs and wage inflation away form younger prime working force Americans

Tru dat, also because older Americans were not introduced to the entitled mentality and were already trained as they once were minimum wage workers as well.

But that does not explain that 1/3 of the welfare in the US goes to Calif. I suspect that welfare is subsidizing the immigrant worker creating a false economy which has taken over almost all construction jobs.

I asked Bob Murphy about this and he referred me to this article:

The Calm Before the Storm

Robert Murphy

Since the fall of 2008, I have been among the economists, many from the Austrian tradition, warning the public about the disastrous policies enacted by the Federal Reserve in response to the financial crisis. The Fed was generating unprecedented increases in the monetary base, which is the quantity of dollars held by the public as currency and held as reserves by commercial banks. In late 2009, I made a public wager with economist David R. Henderson in which I predicted a 10 percent year-over-year increase in the Consumer Price Index by January 2013. I lost that bet. In general, warnings about price inflation seem to have been premature at best, totally wrong at worst.

It's true that consumer prices did not zoom up as I had predicted, but my objection to the Fed's post-crisis policies was never dependent on that specific forecast. Indeed, the distinctive feature of Austrian business cycle theory is that "easy money" causes the familiar boom-bust cycle by affecting relative prices. Regardless of the purchasing power of the dollar, the Fed's actions have definitely interfered with interest rates, hindering the communication of information about the condition of the credit markets. By postponing needed readjustments in the structure of production, the Fed's actions have allowed the problems apparent in the fall of 2008 to fester.

I am still confident that a day of price inflation reckoning looms and that the U.S. dollar's days as the world's reserve currency are numbered, though I have no way of gauging the duration of this calm before the storm. Still, my 2009 predictions about consumer price inflation were wrong, and it's useful to analyze why.

At the time, I thought the Fed's policies were simply going to kick the can down the road and exacerbate the underlying structural imbalances in the economy. The housing bubble had itself been fueled by the artificial monetary stimulus and rate cuts under previous Fed chair Alan Greenspan (in response to the dot-com crash and the 9/11 attacks), and Bernanke seemed to be drawing from the same failed playbook. We would simply replace one bubble with another: in this case, swapping a bubble in U.S. Treasuries (and the U.S. stock market) for the collapsing housing market.

That all still seems true. My crucial mistake back in 2009 was in predicting that other investors would come to agree with my assessment in a year or two. In other words, I thought they would look ahead, realize Bernanke had no exit strategy, and then short the dollar (and other dollar-denominated assets) to avoid holding the bag. More specifically, I thought that commercial banks would eventually realize they needed to get their excess reserves in higher-yielding assets.

Once the commercial banks started this process, the quantity of money in the broader sense (captured in aggregates such as M1 and M2, which include the public's checking account balances at the banks) would begin to reflect the enormous spike in the monetary base the Fed had directly engineered. Remember that in our fractional reserve banking system, when the Fed buys $1 billion (say) in assets and thereby adds $1 billion in new reserves to the system, if the commercial banks proceed to make new loans, then in the process they will create (say) an additional $9 billion in new money, broadly measured. In 2009 I thought more and more investors would begin to anticipate this process, anticipating that the money supply held by the public eventually would start to soar, so that large-scale price inflation would become a self-fulfilling prophecy.

But the U.S. economy has stayed in this holding pattern, where people expect low consumer price inflation and so commercial banks keep their excess reserves earning 25 basis points parked at the Fed rather than make new loans. Thus the process I described above has been thwarted; the quantity of money held by the public right now is much lower than it would be, if the banks decided they would rather make loans and earn a higher interest rate than the 25 basis points currently paid by the Fed.

I do not believe the Federal Reserve can gracefully exit from its current position. Fed officials eventually will be in an untenable position in which they must choose to either (a) crash the financial markets by selling off assets and letting interest rates rise sharply or (b) let the dollar fall quickly in value against consumer goods and services. But in the last six years, they have been granted a very generous grace period before having this hard choice foisted upon them.

According to Austrian business cycle theory, as developed by Ludwig von Mises and elaborated by Friedrich Hayek (who would later win the Nobel Prize partly for this work), interest rates serve a specific purpose in a market economy. Intuitively, the more society saves and is willing to defer immediate gratification, the more we want entrepreneurs to invest real resources in longer-term projects. When the central bank injects new money into the credit markets, this not only lowers the purchasing power of money (other things being equal) but artificially suppresses interest rates and renders long-term projects profitable that in reality should not be pursued.

In the Austrian view, therefore, consumer prices are not a reliable gauge of the "looseness" or "tightness" of monetary policy. Irving Fisher infamously thought the Fed in the 1920s had done a good job because the CPI had been tame, whereas Mises knew that a crash was brewing by the late 1920s.

Fearing an imminent spike in consumer prices because of the Fed's unprecedented actions since late 2008 turned out to be wrong-but if wrong in spirit or merely in timing, only time will tell.

Bernanke's policies were harmful regardless of the impact on the CPI. Pumping enormous amounts of money into the credit markets doesn't make us richer. It just distorts the coordinating function of interest rates. Remember, Greenspan did us no favors by pumping up the housing bubble. Whether or not a massive bout of price inflation breaks out, a crash in the real economy should still be expected.

Robert P. Murphy (rpm@consultingbyrpm.com) is senior economist at the Institute for Energy Research and the author of The Politically Incorrect Guide to Capitalism (Regnery).

Also Peter Schiff made an interesting comment in his article above Dr Murphy's

Broader consumer price inflation has been kept at bay because many of the newly printed dollars don't even hit our economy. Instead, foreign countries purchase them in an attempt to keep their own currencies from appreciating against the dollar. In the current environment, a weak currency is widely (and wrongly) seen as essential to economic growth. That's because a weak currency lowers the relative price of a particular country's manufactured goods on overseas markets. Nations hope those lower prices will lead to greater exports and more domestic jobs.

http://reason.com/archives/2014/11/30/whatever-happened-to-inflation/singlepage

I also asked him about the influence of demographics which he eschewed as a contributing factor but not the main thing that is going on. IMO the graph of money velocity correlates nicely to your housing graphs. Which indicates that is a good place to look for the real cause.

Logan--

Do you really believe that there isn't a lack of supply that is causing higher prices?

(before you answer, no need to tell me how smart you are or how much I hate numbers. Just assume for the sake of argument that I'm at least as well versed in economics as you--even if I'm not on Bloomberg.)