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High House Prices Hurt People


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2009 Feb 4, 4:00am   21,091 views  273 comments

by Patrick   ➕follow (59)   💰tip   ignore  

slavery

Why do we see so much suffering and moaning in the press about falling house prices when high house prices have directly injured and enslaved millions of Americans? To quote myself:

Housing is the biggest expense in nearly everyone's life, far more expensive than food, gas, energy, even more expensive than education or medicine. To reduce the time you spend working to pay for housing is to increase the time you have for everything else.

Cheap housing is good for us all! High housing costs take away from families' ability to save for retirement, fund their children's education, travel and lead a quality life.

How can we make lower house prices our official government policy? How can we completely eliminate the mortgage interest deduction which drives up housing costs and discriminates against renters? How can we wipe out Fannie Mae, Freddie Mac, the FHA, and other agencies whose job it is to enslave Americans to mortgage debt?

Patrick

#housing

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144   OO   2009 Feb 10, 5:57am  

Japan in the lost decade was very much like GD1 America, positive foreign trade balance, manufacturing powerhouse of the world, and lots of excess manufacturing capacity at home.

Today, the excess manufacturing capacity of the US lies in China, we are retreating from an unsustainable excess demand.

145   justme   2009 Feb 10, 8:28am  

Interesting to see who is on the board of the NY Fed:

http://seekingalpha.com/article/119744-geithner-channels-his-inner-paulson-unfortunately?source=headline1

Not that any of this is a secret, but it is not so widely publicized either.

Names: Jamie Dimon, Jeff Immelt, etc

http://www.newyorkfed.org/aboutthefed/org_nydirectors.html

Interesting to see that only 3 of 9 seats are supposed to represent the public, and those seats are elected by the board of governors. Very semi-circular and non-democratic election arrangement, to say the least.

No wonder Geithner is doing Wall Street's bidding.

146   B.A.C.A.H.   2009 Feb 10, 10:20am  

I don't have to pay extra to borrow books from the library. Yes, in California hours will be reduced, but then lotsa folks will also have MORE TIME to use the libraries.

And I can buy used books at about 25cents per inch at the used bookstores, and about a dollar per inch plus shipping from web sellers.

Betcha theres a whole lot more folks like me than there are folks who will pay for a kindle.

147   OO   2009 Feb 10, 10:33am  

justme,

be thankful. Before Geithner's appointment, the front running candidate was Jamie Dimon.

148   frank649   2009 Feb 10, 10:50am  


So Japan was bankrupt on a corporate level

I believe we too are bankrupt at the corporate level. The banks were most problematic for Japan and appear to be for us now. I believe you're correct regarding Japanese consumers back then.

But who took out all those loans in Japan that couldn't be paid back and caused the real estate market to plummet and their banks to become insolvent? Was it mostly just corporate loans? Many consumers must have been in trouble too.

149   OO   2009 Feb 10, 11:17am  

frank,

most of the real estate gambles were made by the japanese corporates and businesses. To be exact, they were NOT really speculating on the real estate (aka, not flipping). Flipping on a residential and commercial level never reached the height of what we saw in the last 5 years. Liar loans, IO, Ninja never existed in Japan and was unheard of.

What in particular happened was, companies in Japan expanded their businesses very aggressively at the height of the realty bubble by mortgaging their own real estate holdings for funding needs. That was how the Japanese banks got screwed: corporate collateral decreased in value dramatically. Unlike the US banking system, the Japanese banks were more rigid in lending, and their public market size was way smaller. The most frequently used collateral for corporates and businesses in Japan was their real estate holdings, the idea of goodwill, IP and other creative financial assets as collateral was not adopted.

The consumers got into trouble because of the corporate debt, which caused many businesses to scale down drastically. The biggest blow in the late 90s to Japanese consumers was the collapse of corporate pension funds, because that was where a substantial share of individual retirement savings sat. There were 100-yr residential mortgage loans at the height of the Tokyo residential bubble, but that was not the norm. Japanese consumers were very cautious and savings-oriented.

But in terms of damage to consumers, we are way ahead. The collapse of our consumer spending caused our corporates to get into trouble, not the other way around. Aside from the banks, there are plenty of corporates with very strong balance sheets and cash flow stream like MSFT, AAPL or GOOG, which are very viable entities themselves.

150   kewp   2009 Feb 10, 11:53am  

We cannot afford a lost decade, a lost decade needs savings to last, we will have a crash landing for sure.

The Japanese had a big problem we do not.

They honor their debts. Its a cultural thing.

Americans have no problem walking away from ten trillion dollars worth of debt obligations if its in their best interests.

In a way; I think this will be our salvation.

151   PermaRenter   2009 Feb 10, 11:54am  

OO,

It is very heartening to know that USA may have a real crash and econmic and social engineering will not be able to fix it. I think similar argument was made at mises.org as well.

I am really rooting for business cycle after watching Alan Greenspan's econoterrorism for a decade.

Lets hope that deflation runs it's due course ... god bless free market!

152   PermaRenter   2009 Feb 10, 11:57am  

If there was such a thing as Groundhog Month, and if there was a movie by the same name (as discussed in this item last week), a bailout plan and plunging stock prices would probably be a recurring event for Phil Conners - they seem to happen about once a month. Since restoring the banking industry's health seems to be such a problem, maybe they should start thinking about euthanasia.

153   PermaRenter   2009 Feb 10, 11:58am  

When historians look back at the financial crisis and ensuing economic upheaval of the last half of the first decade of the 21st century, what will be the storyline?

I submit it will be that, while the public was focused on the tax rebate program, then on the $700 billion TARP, and finally on the $100 trillion economic stimulus package, a much larger drama was unfolding below the surface.

While the public was distracted and focused on these high profile activities and events, other programs and activities some five times larger than those debated and discussed in open forums were being enacted by a select few unelected federal regulators who were making commitments of trillions of dollars backed by tax payer guarantees and loans

154   PermaRenter   2009 Feb 10, 12:10pm  

The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.
...
Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

155   PermaRenter   2009 Feb 10, 1:29pm  

California may have to cut prison population by 40 percentStory Highlights
Overcrowding has created unconstitutional conditions, judges conclude

Gov. Arnold Schwarzenegger immediately promised to appeal the case

Those who would be released would be very low risk, says head of Prison Law Office

156   Paul189   2009 Feb 10, 3:11pm  

@ sybrib,

The public library is the most under used / under appreciated asset in our society!

http://en.wikipedia.org/wiki/Public_library

I don't use it as much as I should but my wife sure makes good use! It is so funny that most of her book club members go buy the books new and she checks them out and returns (on time) no charge.

157   Zephyr   2009 Feb 11, 12:22am  

In Japan during the previous bubble (1980s) you could borrow more than the value of a home or office building. So you could in essence use a negative down payment, and actually get cash back on the purchase. The more you real estate you bought, the more cash in hand. I am sure that the lenders put some limits and restrictions on this practice. But what a bubble stimulator that was. Lending based on expected future appreciated value!

158   DennisN   2009 Feb 11, 12:24am  

Now that I've retired I spend a lot more time at the library. The public library here in Boise is limited - makes sense since their charter is not just to have a reference library of non-fiction books but rather to have lots of kids' books and fiction. The Boise State U library gives out cards to members of the community and they do have a much more extensive collection of serious books. Also the state law library is in town to support the Idaho Supreme Court. You can't check books out but the reference librarians are bored and eager to help. Plus they have free Westlaw terminals there. Do you have any idea how expensive a Westlaw account can be if you have to pay for it?

159   OO   2009 Feb 11, 12:50am  

I'd say that Geithner is doing what anyone is supposed to do in his seat at this moment in history. This is the undisputed route, only available route for anybody in the seat of power. Printing their way out, getting into more debt, until, the final collapse. They know the ending, but it is like a drowning swimmer caught in muscle cramp in fast moving stream, he knows very well that the best response is to relax his body muscles and do nothing until his cramp is over, but he panics nevertheless and cramps up even more, struggling with hopeless strokes and disrupted breathing, which eventually send him into coma and death.

160   BayAreaIdiot   2009 Feb 11, 1:37am  

# justme Says:
February 10th, 2009 at 10:21 am

Geithner proved today that he is a mole for Henry Paulson and W. Bush.

Did you *mean* to call the new President an idiot or did it just come out that way?

161   KurtS   2009 Feb 11, 4:27am  

"Today, the excess manufacturing capacity of the US lies in China, we are retreating from an unsustainable excess demand."

Perhaps that's actually a bit of good news for the US, since our factories weren't recently tooled for what may soon be non-existent demand of retail goods? But of course, there are those US auto factories...

Regarding the US, I wonder how much "excess capacity" is represented by the retail sector, specifically in retail development projects? In particular, the once-lauded "Euro" retail concept, ie townhouses piggy-backed on retail strike me as double-whammy during the downturn.

On a local note, this the downturn does not seem to faze Sunnyvale govt., which has diverted public funds into a retail/residential development that's still under construction. Rumor has it they're not finding enough merchants. Taking this fiasco further, Sunnyvale also plans to convert the Onizuka AFB into an auto mall. Brilliance!

162   justme   2009 Feb 11, 4:44am  

BAI. Obama is in a tight spot. He could have made someone like senator Bernie Sanders or Paul Krugman the new SOT (sec of treasury), but van you imagine the blowback? Or is it Ron Paul you would like ;-).

163   tannenbaum   2009 Feb 11, 5:00am  

Breaking News - $15,000 joke of a tax credit in the now agreed upon stimulus bill has been eliminated. HORRAAAAYYYYY!!!! I bet the NAR is super pissed off today.

164   Peter P   2009 Feb 11, 5:11am  

Or is it Ron Paul you would like ;-).

Ron Paul will actually fix the system.

165   Patrick   2009 Feb 11, 5:20am  

Breaking News - $15,000 joke of a tax credit in the now agreed upon stimulus bill has been eliminated.

tannenbaum: do you have a link for that?

166   BayAreaIdiot   2009 Feb 11, 5:31am  

@justme

I like how you're already making excuses for him. Still hoping he's different I guess, so you have to.

I'm not a Ron Paul fan.

How about Taleb or Roubini? That would make waves, not Krugman!

167   justme   2009 Feb 11, 6:25am  

Sure, bring on Roubini. Or George Soros.

168   justme   2009 Feb 11, 7:04am  

A good explanation of the purpose of currency swaps:

http://seekingalpha.com/article/120039-bond-expert-the-emperor-has-no-clothes?source=headline1

Quote from the comments section:

FED prints dollars. ECB prints euros. FED and ECB swap currencies and now the FED owns the euros and the ECB own the dollars.
Next step: ECB buys Treasuries with their dollar, FED buys Schatz with their euros (or whatever).
Financial media in US proclaims: high demand for US Treasuries!!

What a joke.

169   tannenbaum   2009 Feb 11, 7:06am  

Patrick: Here you go:

http://news.yahoo.com/s/ap/congress_stimulus

It's near the bottom, 7th pragraph from the end.

170   tannenbaum   2009 Feb 11, 7:09am  

Here's another more relevant article about the tax credit elimiantion for home buying:

http://www.mlive.com/business/ann-arbor/index.ssf/2009/02/tax_break_for_home_buyers_out.html

What a great day. Honestly, every person in real estate I know was salivating over this. Their collective balloon just got popped.

171   justme   2009 Feb 11, 7:10am  

Basically, rather than the Fed buying Treasury directly in return for printed dollars, they print dollars, swap against EUR/GPB/whathaveyou, and then buy european bonds, while the europeans do the same for us.

In other words, it is a scheme to disguise the printing by involving the co-operation of a third party, and in a way that ensures a balance between the currencies.

This is nothing short of brilliant. Finally I understand it.

172   Peter P   2009 Feb 11, 7:27am  

This is nothing short of brilliant. Finally I understand it.

Nothing brilliant. We are just dumb. :(

173   Peter P   2009 Feb 11, 7:43am  

Change!

Why is Obama delaying the shut-off of analog TV signal?

174   justme   2009 Feb 11, 8:04am  

Because we ran out of coupons for digital tuner/converter boxes.

175   Peter P   2009 Feb 11, 8:28am  

Because we ran out of coupons for digital tuner/converter boxes.

Why do we even need coupons at all?

176   PermaRenter   2009 Feb 11, 11:23am  

>> can i marry your wife?

He can reply by saying:

can i marry your daughter?

And it can go downhill from there ....

177   PermaRenter   2009 Feb 11, 11:49am  

Bay Area, Silicon Valley executives expect more layoffs

Bay Area businesses are anticipating many more layoffs than hires in coming months, according to a new quarterly survey of 505 executives across the nine-county region that found business confidence at a record low.

"We clearly have not hit bottom," said Jim Wunderman, chief executive of the Bay Area Council, a business group that promotes the regional economy. Half of the executives said they expect economic conditions to be worse in six months, while only 21 percent said they expected improvement.

"Unfortunately, significantly more layoffs and business failures seem inevitable in every industry and every corner of our region," Wunderman said. "Indeed, some of our regular survey participants were unable to respond because their company was now gone."

The survey's business confidence index registered 31 on a 100-point scale, one point below its last reading in November.

Unlike previous surveys, this one found no part of the economy immune to layoffs. Overall, 42 percent of respondents said they expected to decrease their work force, while only 10 percent plan to make increases. The latter figure was down from 13 percent in November.

Previous surveys have generally shown that Santa Clara County, the heart of the greater Silicon Valley, was stronger economically than the region as a whole. But this survey showed little difference: 39 percent of Santa Clara County executives said they anticipate layoffs, while 11 percent predicted hiring.

178   PermaRenter   2009 Feb 11, 11:50am  

Telik Inc. said Wednesday it will cut about 43 jobs and reorganize to focus on its "most advanced preclinical and clinical drug development programs."

Palo Alto-based Telik (NASDAQ:TELK) said the restructuring will involve a workforce reduction of 44 percent, primarily in early-stage discovery and support positions. Employees directly affected by the restructuring plan will receive severance payments, continuation of benefits and outplacement assistance, the company said.

The company estimates it will take about $900,000 in severance-related charges in the first quarter.

Telik is a clinical stage drug development company focused on discovering and developing small molecule drugs to treat cancer and inflammatory diseases.

179   PermaRenter   2009 Feb 11, 11:50am  

Applied Micro Circuits Corp. said Wednesday it plans to cut about 100 jobs in an effort to reduce annual operating expenses by $14 million to $16 million.

Sunnyvale-based Applied Micro Circuits (NASDAQ:AMCC) said the cost reduction is expected to take effect by fiscal year 2010.

The company did not say where the jobs would be cut or what positions would be effected.

180   PermaRenter   2009 Feb 11, 11:52am  

Here in Silicon Valley, the housing market has been struggling to stay afloat. According to real estate Web site Zillow (which we've been trying not to check lately; it's just too depressing), home values in the beautiful (if bureaucratically named) San Jose-Sunnyvale-Santa Clara metropolitan statistical area plunged 17.2 percent in the last three months of 2008 compared with a year earlier. Even worse, about one-fifth of homes in the Valley of Heart's Delight are "underwater," meaning owners can't sell them to pay off the mortgage.

181   PermaRenter   2009 Feb 11, 12:00pm  

Lost your job recently in Silicon Valley? Part of San Jose’s growing army of job-seekers? We’re looking for volunteers for Pink Slip 2.0

Lost your job? We should talk.

The Mercury News is looking for people recently laid off in Silicon Valley. We’ll select three of you to follow in your job search over the coming months, chronicling the same dramatic saga that’s spinning off thousands of new job-seekers every month.

In the pages of the newspaper, and across an online landscape of nteractive and social-networking tools at mercurynews.com, your stories will become part of a much larger narrative. As readers share in your own hopes and fears, false starts and lucky breaks, you’ll become the emotional hub of a sprawling virtual community. Over time, your stories will tie together folks looking for work and people looking to hire, career experts and seasoned veterans of past slow-downs, family and friends and even those currently employed but bracing for a pink slip.

In fact, in the spirit of networking, we’re calling the project Pink Slip 2.0.
Just as the dreary unemployment picture it mirrors, we expect this collective tale to gather steam in the coming months. Beyond the continuing series of cliffhangers featuring our three main job-seekers, the project will become a burgeoning one-stop shop for all things jobless - coping techniques and emotional red flags, how-to tips on navigating the unemployment bureaucracy, health care and tax relief, job retraining and tricks for connecting with others out there re-inventing themselves.

And with online user forums and live chats from career consultants, the goal is more than simply narrating your personal stories. It’s pulling together the thousands of strands of a local community let loose in this global economic maelstrom.

To help make the project as practical, transparent and technologically savvy as possible, we’ll also create social-networking components like Facebook and Twitter, as well as blogs and multimedia presentations, to help us all tell the story together. If you do find a job, we’ll look for a replacement, but still occasionally check in with you. To volunteer, make sure you’re comfortable publicly sharing the financial and emotional aspects of your own joblessness. Then send me an email at pmay@mercurynews.com.

We’ll email you a brief questionnaire, then narrow down the list to a dozen people we’ll bring in for final interviews. From those, we’ll select three people to follow.

Thanks!

182   thenuttyneutron   2009 Feb 11, 12:31pm  

http://seekingalpha.com/article/119619-how-the-world-almost-came-to-an-end-on-september-18-2008

This is a scary article. I somehow think the bankers still don't get it. They are not going to be happy till angry mobs show up with tar and feathers.

183   Peter P   2009 Feb 11, 12:42pm  

This is a scary article.

... Democratic Representative ...

Oooh. Enough said.

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