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I would prefer a situation of inflation rather than deflation. Especially when financing something like a house over 30 years. With inflation the rising wages would cause the payment as a percent of income to be lower and lower each year. Whereas, with deflation the payment becomes steadily more unbearable.
Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.
The people with assets would be those with inherited wealth. .
As many are finding out today, it is difficult to save when rent is 50% of your pay.
RWSGFY says
Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.
The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.
Not for Joe Howmuchamonth. Joe stretches to buy a home on a 30 year mortgage. Then Joe stretches again to buy a car on a 7 year loan. Inflation kicks in. Now Joe sees his nominal wages rise along with the price of his house. The house and car are on fixed rate loans. In 10 years, Joe has a "cheap" monthly mortgage and a paid for car he can trade in to offset the inflation on new cars. I myself am a saver and have not had a residence mortgage since I paid off my first house early, but I recognize the situation of inflation helping the high debt folks.
Reality says
RWSGFY says
Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.
The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.
But then deflation kicked in, didn't it? Deflation is good, right? Why nobody was happy about it?
Misc says
Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action
You are confusing volume vs. price. Volume peaks often coincide with turns in price direction, whereas volume troughs usually doesn't signal much of anything. Basic charting / technical analysis. Please do not put words in my mouth; thank you. It usually takes time for people to go through the 5 to 7 phases denial through acceptance. The first period of low volume is usually result of denial on the part of people who recently bought.
Reality says
RWSGFY says
Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.
The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.
But then deflation kicked in, didn't it? Deflation is good, right? Why nobody was happy about it?
Reality says
Misc says
Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action
You are confusing volume vs. price. Volume peaks often coincide with turns in price direction, whereas volume troughs usually doesn't signal much of anything. Basic charting / technical analysis. Please do not put words in my mouth; thank you. It usually takes time for people to go through the 5 to 7 phases denial through acceptance. The first period of low volume is usually result of denial on the part of people who recently bought.
I am not putting words in your mouth. You stated:
There are always more people buying at the peaks than at the bottoms (...
The poor lost their assets
But earlier in the thread somebody said that deflation is GOOD for working people w/o assets. Why these types weren't happy during high deflation either?
They locked in rates of about 3% for 30 years. Short term rates from the Fed are about 4.5% now.
But earlier in the thread somebody said that deflation is GOOD for working people w/o assets.
Eric Holder says
But earlier in the thread somebody said that deflation is GOOD for working people w/o assets.
It is, provided they don't lose their jobs.
The artificially low interest rate drove up the prices (loan size) for buyers and refinances that had a cash-out component. The banks were not losing money by offering a lower interest rate so long as they are allowed to extend-and-pretend "hold to maturity" or sell the loan off to others; on the contrary, they were making money from refinance fees before selling off the loans to other ponzi scams that suck in retirement and pension funds. The heist was against retirement fund account holders and pension fund account holders.
Now the borrowers on low interest rates are locked in, unable to sell and relocate.
Misc says
They locked in rates of about 3% for 30 years. Short term rates from the Fed are about 4.5% now.
All this is going to result in is that the next generation will never be able to buy a home.
Good job!
Bankers will own everything in time.
These were refinancings on properties that were already purchased. The banks are losing money on them because they are paying a higher interest rate than they are receiving on their "hold to maturity" assets.
If they sell the loans off to others, they take their loss now all at once.
Retirement and pension funds stayed away from these MBS (instead they are more into high yield ponzis). Nope, it's the financial institutions and the Fed itself who are the bag holders. The borrowers are not "locked" in they can sell and/or rent as they please unless prices drop below what they paid for the homes many years ago.
Wait, so deflation causes job losses and increase in unemployment?
The banks are paying a higher rate to savers than they are receiving from the MBS on their books. That is how they are losing money. Yes, they do have to borrow every dollar they loan out except for the stockholder's equity.
The Fed is not "at the ready" to pay/swap at face value. You are mistaken on the Fed's lending program. They will loan at "face value", but will charge current interest rates. The banks still lose money...just slower than selling at a loss all at once.
;
They borrowers are not "locked in". These were REFINANCINGS of mortgages taken out for properties bought years before.
People at the Fed are not super highly paid. They are on the same pay scale as other government employees.
The real people are those that refinanced their mortgages at a record low interest rate for a record amount of trillions of dollars.
The banks and the Fed are sitting on record losses. If you mark to market.
Eric Holder says
But earlier in the thread somebody said that deflation is GOOD for working people w/o assets. Why these types weren't happy during high deflation either?
Were you not happy when PC price dropped from $10,000 in 1980 to $500 in 2000? or not happy when functional cellphone with a big touch screen dropped from $1000 in 2000 to $150 today? Mild deflation is what brings improvement in standards of living for the society at large. The deflation between 1929-1933 was not a mild deflation but a massive crash that had loans attached to the assets. The problem was the loans and the manipulation of loan interest rates and collateral values. If banks didn't exist to extend loans to buy real estate, and there was no margin loans for stock trading, the pain would not have been nearly as much.
This gold was accumulated prior to the current rebellion and was intended to be used to establish a pan-African currency
based on the Libyan golden Dinar. This plan was designed to provide the Francophone African Countries with an
alternative to the French.franc (CFA).
(Source Comment: According to knowledgeable individuals this quantity of gold and silver is valued at more than $7
billion. French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the
factors that influenced President Nicolas Sarkozy's decision to commit France to the attack on Libya. According to these
individuals Sarkozy's plans are driven by the following issues:
a. A desire to gain a greater share of Libya oil production,
b.Increase French influence in North Africa,
UNCLASSIFIED U.S. Department of State Case No. F-2014-20439 Doc No. C05779612 Date: 12/31/2015
c. Improve his intemai political situation in France,
d. Provide the French military with an opportunity to reassert its position in the world,
e. Address the concern of his advisors over Qaddafi's long term plans to supplant France as the dominant power in
Misc says
The banks are paying a higher rate to savers than they are receiving from the MBS on their books. That is how they are losing money. Yes, they do have to borrow every dollar they loan out except for the stockholder's equity.
Do you not understand what fractional-reserve banking is? Even if there were a 10% reserve requirement, the bank paying 4% interest on $1M deposits (and they are not paying that much except for on CD's and only starting the last few weeks) allows it to lend out $10M, even at the lowest 30yr fixed mortgage rate there ever was at about 2.75%, the annual interest income would be $275k, to pay an annual interest expense of $40k on the $1M. How is that losing money? Seems there is a 273k - 40k = $233k gross profit; i.e. 233 / 40 = 582.5% gross profit margin! The real reserve requirement is much lower than 10%; currently sub-5% or near 0%, so th...
The really nasty thing about the depression in the 30's was that all loans were callable. So the banks called in all the loans that were almost paid off, and the debtors, who were practically paid off, had their assets seized. The banks didn't even get around to the 100% LTV people before public outrage ended the mass evictions.
Wages can increase until people can afford the new homes to be built.
If you work for a living and are in debt, deflation would reduced your wages until you could not make payments and you would lose whatever you went into debt to obtain.
The people with the assets would sit back and collect it all.
I recognize the situation of inflation helping the high debt folks.
Since 1913, the price of silver has gone up about 3.3% per year vs the dollar
Misc says
Since 1913, the price of silver has gone up about 3.3% per year vs the dollar
Well here is a simple chart for you that shows that relationship:
https://www.macrotrends.net/1470/historical-silver-prices-100-year-chart
Hint: take off log scale and inflation adjustment to see the effect of inflation!!!
Funny enough, there is no need to talk about "investing" in silver/gold up until the late 1960's! This is when the government started printing dollars not backed by the metal in the bank.
So if you take your 3.3% per year, and subtract out all the flat years between 1913 and 1971, to when nixon took us off the commodity standard, you will see that an ounce of silver (which has not changed at ALL and has been NON-productive) went...
If everyone was on the gold/silver standard the rate of return is ZERO
Misc says
If everyone was on the gold/silver standard the rate of return is ZERO
Isn't this what we are saying!?! Yes. You get the point. No need for a return on cash in a savings account if your cash isn't devaluing at 5.5% per year on average!
Fractional Reserve banking is for the system as a whole and creates CREDIT.
Do you understand accounting? Where assets equal liabilities+ owner's equity. This is a requirement for banks too ! ! ! (Hint: You can look at any bank's balance sheet at any financial website)That 4% payment on liabilities is on all the liabilities not 10% of the liabilities. Currently the reserve requirement is set at 0%. The amount that can be loaned is based on the bank's equity.
The percentage of income that would need to be saved for retirement simply could not be achieved. Retirement is a fairly modern construct requiring fiat currency.
There is also no way to get a return higher than ZERO because of system collapse and no way to save.
Gold manipulation is a sound argument for paper currency. At least fiat money supply is more fungible than Gold. Everyone is trading the same dollars. I promise you all that under Gold, you're issued tokens or script in exchange for your labor. You can't save up those financial means to improve your situation.
There is also no way to get a return higher than ZERO because of system collapse and no way to save.
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