patrick.net

Interesting. I agree with most of your financial logic. Completely congruent with conservative fiscal policy. I'm a little disappointed with your stereotypical understanding of the conservative viewpoint, however; it's a classic marxist approach, i.e., you view the world completely in economic terms. Justice, morals, ethics are all understood in economic terms.

I actually agree with you about the taxes for the very rich. That's why I believe in the very CONSERVATIVE policies of Steve Forbes and his FLAT TAX. If you were to run the numbers, the flat tax is actually the ethical form of tax (and it would be on SALES, not income: I agree with you on that, as well).

Actually, I think you are a conservative FISCALLY, but a socialist, er, SOCIALLY.

However, you seem to equate "conservatism" with Christianity. This is a mistake. A worldview inspired by Christianity actually applauds your views against forcing moms into the workplace in order to keep families from participating in civic events and voicing our concerns. Policies that place unreasonable taxation on families, the "marriage penalty tax," etc ... are all against a Christian-inspired view, IMHO. Ironically, these policies are all liberal--not conservative--social policies that force mothers into the workplace and keep them from participating in the political process. That is why I agree with the conservative tenent that "a government big enough to give you everything you want is also big enough to take away everything you own." And history shows us that 100% of the time, that is what happens.

Some of your statements are perplexing. You call yourself a ("qualified") liberal, yet you agree with conservative policy that the income tax, as well as Fannie Mae (a liberal F.D.Roosevelt--i.e., "Obama I", invention), should be eliminated. Both are marxist policies created by American liberal administrations over 100 years ago. So I'm confused with your "liberalism." At it's core, it sounds like classic conservatism to me.

Where you are classically "liberal" is your social views: "Liberals say that everyone should be free to live life how they want to, as long as they don’t hurt anyone else. The people dictating the conservative agenda ... manipulate your feelings about patriotism and religion ... [T]hey create fear to control you ... "

Oh my. My thirteen year old son says the same things about me, so I will answer this childish notion (which characterizes most of the liberal opinion) on this level. My 13 year old, too, wants to do "whatever he wants as long as he hurts no one." Since when he is making the rules as to what is right and wrong? Since when is some standard of "hurting" someone even a part of determining what is "good" or "bad?" And if it is a part of it, whose definition of "hurting someone" do we use? Take a rapist: do you not think his definition of what constitutes "hurting someone" differs even a little bit from yours and mine? To gloss over these critical principles of the conservative agenda is destructive. It makes sense to me once your denial, however, of a reality that transcends our own, is taken into account.

I find it comical that conservatives are smeared with this indictment of using "fear" when the current, most liberal administration in U.S. history has done nothing but use fear to get legislation passed that completely socializes our nation, will ultimately remove all privacy and private property, and imposes a "one world government" pre-cursor on Americans.

Anyway, I find, typically, your understanding of conservatism and Christianity to be somewhat immature, uninformed, and elitist (condescending). But that's the world we live in. No offense taken--I completely understand your statements once, again, belief in a reality that transcends our own is removed--then sure, what you say makes perfect sense.

I am reading more of your comments.

Makes sense now. You are a libertarian, which, truly, except for santicy of life issues, is the closest ideology in a political sense that we have to Christianity, IMHO.

Now there's the whole issue about whether you vote your conscience and 'waste' your vote on an unelectable party, or vote Republican because they are the closest morally, economically, and socially to one's belief system.

Dear Patrick:
I enjoy reading the facts you distribute and wish there was a way that I could know for sure that what you say about the rich is true. Don't the highest incomes pay around half the taxes? Where can we get the real truth about that statistic. It seems like its all up for grabs when it comes to that kind of government statistic. Some "facts" state one thing, other "facts" state the opposite. How can we get proof of the real facts?

Hi John,
depends on how you look at it. Tax rates on the rich are actually much lower than the tax rates on you and me. They pay 15% tax on most of their income (cap gains and dividends) while you and I pay 28% or more.

Also, we actually work for our money. Capital gains and dividends are "passive" income. They just sit there and it rolls in, as a rule.

Thanks for the site Patrick. I agree with your approach for the most part, though the labels escape me and seem to bind up everyone else.

I had more hope than was warranted with Obama and still know he was the best choice of the two, but from the moment that the same old shills Larry Summers and T. Geithner lined up for the big econ jobs, it was clear we were heading for more of the same. The insane spending and borrowing of the last administration got our asses in a sling and the new administration is incapable of administering the tough medicine needed to cure what ills.

But no matter how much the government dips its toes in and screws up the housing markets, I believe the drop in home prices is gong to continue for several years still, especially as you go into the mid and high markets. I live in Los Angeles, so a practical mid would have to be around $450K and high over a million. I see those dropping another $25% before it's said and done. I believe the lower end of the market may be at or is close to a bottom since it has become truly affordable. I bought a foreclouse in a "starter" market two months ago. Because I bought the place below market, I don't think that the value is going to drop from where I bought it, because this part of the market has already been buffetted by waves of foreclosures and is very soft

Proportionately, I believe you will now see a rise in mid-level foreclosures, if that's not already happening. When these broke yuppies realize there is no way out of the fix they're in but to say goodbye to whatever equity they had or thought they had and capitulate, then that market will begin to bottom. This will take quite a bit of time and a sea change in psychology as folks leave the land of denial. If you have a good job and your loan is fixed, you can postpone the reality that your house is a black hole sucking up your money for a long time. Others lose a job and are so close to the edge they have to face the music sooner and get foreclosed on. Some of the smart ones realize they've been caught on the wrong side of this mess and do whatever they can do to get out and star over. Still, altogether, years of one by one, we give up.

Hi Patrick-

Great info resource! I have a sneaking suspicion that it is the goal of the government to inflate the living heck out of the dollar so that, magically, all the home owners will no longer be upside down on the homes. Of course, this solution just robs us all blind but ultimately, I don't see any other government action long term.

Of course I have no idea when the hyper-inflation will happen. Just like 2004-05, it was plainly obvious that there was a huge disconnect between average income and average home and average family spending. It did eventually crash but there seemed to be a long time when the music stopped and lots of folks were still dancing.

So, now we see the gov't subsidizing housing, new vehicle purchases, etc. so this tells me that the super-inflation will happen but we don't know when of course. So, I am thinking that buying a home in the next year or so might be prudent since those with cash will be robbed but those with debt will be helped / subsidized if you have a fixed rate mortgage.

Also, long term interest rates have to rise- they must cover: inflation, profit on investment, and risk of default. Once again, at this time, I can't imagine that interest rates come close to covering either inflation or risk, much less all three items listed!!!

So, I continue to fight with myself about buying another home now.

A test of the image upload system...

johnnicinco says

Dear Patrick:
I enjoy reading the facts you distribute and wish there was a way that I could know for sure that what you say about the rich is true. Don’t the highest incomes pay around half the taxes? Where can we get the real truth about that statistic. It seems like its all up for grabs when it comes to that kind of government statistic. Some “facts” state one thing, other “facts” state the opposite. How can we get proof of the real facts?

Patrick omitted a couple of facts in answering. Self employed people pay self employment tax which is equal to your social security tax and the employer's contribution. Technically that is part of your pay as well. In any case, a lower income person pays an additional 15% of their wages for Social Security and Medicare. The 12% for Social Secuirty caps out at about $100,000. Therefore the marginial income above $100,000 is not subject to Social Security and so basically is being taxed at 12% less although, higher rates apply as your income climbs to higher brackets.

The other injustice on working people is that passive income doesn't have self employment tax at all. Capital gains (passive as well, no self employment tax) rates are lower than income taxes so income from passive activity is taxed very lightly. There is no self employment tax for rental income (most cases), interest income, dividends and S corp distributions. In addition you have lower rates for gains like sales of stock long-term, real estate (primary homes have no gains tax in most cases) or other gains such as gold.

We should ideally eliminate ALL income tax, or at least raise the taxable minimum to $35K per year AND set a maximum labor tax of 30% for the highest paid laborers. Every time a tax cut gets discussed in congress, they use a cost/benefit to our deficit utilitarian type of debate to make their decision. What ever happened to right/wrong, or constitutional limits of government? An income tax is a tax on labor, as is the social security/Medicare tax. Taxing labor lowers the resources each employee may use on himself while also raising costs of production greatly lowering the employees' level of net consumption. People mistakenly hold this against the evil corporations, as the government demagogues use the business execs and shareholders as scapegoats. All the while the real culprit, the federal government, gets more resources which they may use to justify their own existence and buy votes.

CBO - BINGO! You hit the nail on the head. Eliminate all income tax. Our country did very well and had virtually no inflation for approx our first 150 years...with NO income tax and sound money.

Good question... what happened to the co0nstitutuonal limits of gov't ? Well, its pretty clear NOW that violating the law (the conaswtitution) has very real conseqwuences. Something politicians never seem to be concerned about.

Yea, lots of people like to denounce corporations and business's. However those are the very entities which provide jobs, pay taxes and many (not all) produce things (unlike gov't which produces nothing).

Correct again...gov't always accuses the greerdy corpotation, greedy business and the greedy buiness man of being the guilty parties - so they can heap on more oppressive laws, rules, regulations, statutes and at times even more taxes. This is MAJOR reason companies and jobs go "off-shore". Its a 100% reaction t0 gov't over regulation. The term frequently used is "UNINTENED CONSEQUENCES," again, something that politicians don't seem to care about. Politicians care only about what there new law looks like to the general public - but are unconcerned about the results of their actions. Who is John Galt?

And correct again...the real culprit is the GOVERNMENT (a single body - two headed beast). Don't get me wrong. I'm in favor of gov't ...you can't run a country without it. It does assist in coordinating necessary services BUT gov't has MUTATED. The SERVENT has become the MASTER, and America is suffering because of it.

And finally CBO -you are correct, the gov't sucks up taxpayer money to justify their existence, and give handouts to dependents in order to buy votes. That reminds me of this very asstute saying. "If you rob Peter to pay Paul, Paul will ALWAYS VOTE FOR YOU."

The solution to our problems is to return to LIMITED Government, follow the law of the land (the Constitution), and restore the countless freedoms we have lost by eliminating the laws which caused the loss of our freedoms in the first place.

Thought for the day: "if we have more laws than other countries - are we truely more free ?" Honest Abe.

P.S. I was going to hit spell check and can't find it - darn I hate when that happens. Just read through all the mistakes - content is what matters.

'BAD SPELLERS OF THE WORLD UNTIE!" Abe

There's a good article written by a Pepperdine econ prof that discusses this idea.

"Greedy-Bastard Economics
by Gary Galles

If your landlord or apartment manager hasn't gotten around to fixing your garbage disposal for weeks, how carefully do you think about why? If you are like many people, you simply blame your landlord or manager, rather than inquiring further.

This is an example of greedy-bastard economics: rather than tracing their understanding of something they dislike back to its ultimate source, people only trace it back until they get to someone they can demonize as a greedy bastard. That is, scapegoats become what Frederic Bastiat called "what is seen," while the real cause remains "what is unseen." Unfortunately, that real cause is frequently the coercive hand of government, moving control of resources to itself, and the blame for the resulting consequences to others.

In the case of rental housing, rent control rather than the "greedy-bastard" landlord may be the real cause. Rent control undermines landlords' incentives to provide the services tenants want, because it denies landlords the ability to receive adequate compensation to make their efforts worthwhile. What landlords are blamed for is in fact one of many predictable, adverse consequences of rent control, including housing shortages, increased discrimination, increased uses of subterfuges to evade the controls (like tying willingness to rent to astronomical key deposits or the simultaneous rental of furniture, parking or other goods), reduced construction, and deterioration of the housing stock.

All these predictable effects follow without landlords being any greedier than anyone else (although rent control might attract greedier people, who are more willing to do what it takes to get around the regulations), which should properly placesthe blame at the feet of the government body that imposed the controls. But instead, government gets to control resources without paying for them, while "greedy-bastard" landlords who would otherwise look for ways to cooperate with renters get the blame.

Rent control is not the only example of the adverse effects of price controls. All price ceilings reduce the quantities traded, wiping out the wealth that would otherwise be created by mutually agreed-upon arrangements. They also increase discrimination (and evasion efforts) by lowering the cost of saying "none for you." And people blame the greedy bastards they deal with directly rather than the greedy bastards in government who are the actual cause and who impose the cost of doing their will on others without compensation.

Price floors such as minimum wage laws, Davis-Bacon "prevailing wage" requirements (which far exceed prevailing wages), and agricultural price supports push allowed prices up instead of down. However, they also increase discrimination (by buyers rather than sellers), and reduce the quantity of mutually agreed arrangements and the wealth they would have created (by making buyers willing to buy less).

All of them increase the costs borne by producers, and therefore by consumers and taxpayers, but place blame on producers rather than the policy makers responsible. And as with all price controls, they make prices, which are the signals of relative scarcity by which social cooperation is maintained, misleading indicators. Market prices are messengers of the effects of government restrictions, but they are not themselves to blame.

Hidden taxes are another mainstay of greedy-bastard economics. They give the government resources and control, but give the blame to those whom people deal with directly. The employer half of Social Security and Medicare is a prime example. Employers must pay 7.65 percent directly to the government, on top of the wages they pay employees.

"Market prices are messengers of the effects of government restrictions, but they are not themselves to blame."But since employers know they must bear those costs, they offer less pay for a given level of employee productivity. The consequence is anger at employers for not paying employees what they are worth, when any such effect is actually the result of compensation being siphoned off by government.

Similar effects are triggered by employer-paid unemployment, worker's compensation insurance, and other nonwage forms of compensation. The resulting government rake-off from employees' total compensation leaves them less to take home, triggering resentment at employers. But government claims credit for all the benefits those dollars finance.

Corporate taxes, which economists particularly object to for the large distortions and costs to society they cause, are another major example of greedy-bastard economics. To the extent that those higher costs result in higher prices, the corporations are demonized for greed, but government gets the resources. Similarly, to the extent these costs lead to reduced wages, workers blame employers, but government gets the resources. In addition, these taxes reduce the after-tax rate of return on corporate investments, reducing the level of those investments, slowing the growth of worker productivity and the income it would generate.

Similarly, taxes imposed on "not me" are ways for government to claim credit for the resulting spending without the blame for the tax burden. America's highly disproportionate, "soak-the-rich" income-tax burdens are the largest and most obvious example. These income taxes not only finance the largest fraction of government spending, but also allow almost two in five households to have negative income taxes, largely because of the refundable Earned Income Tax Credit.

In addition, taking away a great deal of the after-tax incentive for high-skill individuals to bear the risk and put in the effort to find ways to benefit others reduces the value of output supplied. Thus, it acts as a tax on others when the reduced supply of productive services raises prices.

"Not me" taxes include hotel room taxes, which are largely imposed on people from out of state to finance benefits for residents. They also include import tariffs and quotas, dumping restrictions, and other barriers to international trade. By the time the goods reach consumers, their burdens are already included in the price (as with value-added taxes in other countries), and sellers can once again be blamed for the revenues government receives.

Government mandates and regulations, whose estimated burdens exceed $1 trillion a year, also take advantage of greedy-bastard economics. The web of restrictions is vast, running the gamut from Sarbanes-Oxley burdens to low-income housing set aside to qualify for permission to build, yet buyers are only dimly aware of the burdens these rules impose on producers.

But whatever they are called, those regulations give government added control over resources. And, since they act like taxes (an employer doesn't care whether a $100,000 burden of dealing with government is called a tax or a regulation), they raise costs and prices to others, for which suppliers will largely be blamed.

Similarly, government barriers to entry, like licensing regulations, restrict supply and competition, but focus complaints about prices and shoddy performance on those in the industry. Antitrust laws, which often restrict competition in the name of protecting it, are used to demonize efficient firms and practices. Such laws let the government claim credit for consumer protection even as they undermine the competitive process that is the real protection.

Inflation is another page from the same playbook. While it is caused by government expansion in the money supply, those in government can always point fingers at some greedy bastards other than themselves, whether it is businessmen raising prices or workers demanding higher wages in response.

Greedy-bastard economics is also used to separate responsibility from blame for financial bubbles. For instance, the housing and bad-loan bubble was widely blamed (especially by those overseeing government regulations) on greedy loan originators and unregulated markets. This blame was used to promote increased government intervention as a cure.

"Greedy-bastard economics is also used to separate responsibility from blame for financial bubbles."But government's hand was everywhere you looked in any serious attempt to understand the alleged "market failure." The Fed's maintenance of interest rates far below what the level of savings would actually sustain made housing falsely profitable. Allegations of redlining led to implicit government requirements that banks lend to borrowers who didn't meet conventional financial standards, and whom banks knew often couldn't repay their debts.

Under pressure for financial malfeasance and other failings, Fannie Mae and Freddie Mac made it clear that they were in the market for "bad" loans in a big way (well over $1 trillion). Given that their hidden subsidies (particularly implicit government guarantees worth over $2 billion a year and lower capital requirements than the rest of the financial system) had made Fannie and Freddie by far the dominant players in mortgage lending, this declaration told others that bad loans were far safer than they really were. No matter how bad the loans, Fannie and Freddie would take them off your hands. When that implicit guarantee suddenly dissolved, market participants (worldwide, not just in the United States) were suddenly faced with the real risks and far-lower values of these assets.

Even the latest healthcare "reform" reflects greedy-bastard economics. Pundits blame insurance companies for rising healthcare costs, yet ignore the plethora of government mandates and restrictions, not to mention subsidies to subgroups of citizens (e.g., the elderly or poor), which raise the costs to everyone else. Similarly, insurance companies are blamed for excessive administrative costs, even though these are directed largely at dealing with fraud, government impositions, and the supposedly obvious waste of profits.

Having tarred insurance companies with the blame, government now proposes more greedy-bastard economics as the solution. Such policies will further increase costs that can be blamed on insurance companies: Companies won't be able to deny coverage for preexisting conditions, which means they must pool higher cost customers in with lower cost customers, thus requiring higher premiums. They will not be able to control risk by putting annual or lifetime caps on coverage, similarly raising costs that must be borne by all policy holders. They will be required to include certain preventative care with no extra charge, and to limit out-of-pocket costs, which also may maim the private markets for catastrophic coverage.

$20 $14

"Government has no power to eliminate scarcity."In reality, scarcity is the cause of many of the difficult choices individuals face. However, governments prefer to find "greedy-bastard" bogeymen to blame. This allows governments to play as saviors rather than as the parasites causing the problems in order to benefit favored constituencies at others' expense. But government has no power to eliminate scarcity.

Government, beyond its role of defending voluntary arrangements against force and fraud, only makes the effects of scarcity worse. It substitutes decisions by people with worse information and incentives, backed by the power of coercion, for decisions by people with better information and incentives. That is why it is actually government "solutions" that increase the influence of greedy bastards in society. After all, "greedy bastard" is an excellent description of someone who demands power over others without cost or their willing consent; and falsely blames others to gain it."

CBO - BINGO! You hit the nail on the head. Eliminate all income tax. Our country did very well and had virtually no inflation for approx our first 150 years...with NO income tax and sound money.

Good question... what happened to the co0nstitutuonal limits of gov't ? Well, its pretty clear NOW that violating the law (the conaswtitution) has very real conseqwuences. Something politicians never seem to be concerned about.

Yea, lots of people like to denounce corporations and business's. However those are the very entities which provide jobs, pay taxes and many (not all) produce things (unlike gov't which produces nothing).

Correct again...gov't always accuses the greerdy corpotation, greedy business and the greedy buiness man of being the guilty parties - so they can heap on more oppressive laws, rules, regulations, statutes and at times even more taxes. This is MAJOR reason companies and jobs go "off-shore". Its a 100% reaction t0 gov't over regulation. The term frequently used is "UNINTENED CONSEQUENCES," again, something that politicians don't seem to care about. Politicians care only about what there new law looks like to the general public - but are unconcerned about the results of their actions. Who is John Galt?

And correct again...the real culprit is the GOVERNMENT (a single body - two headed beast). Don't get me wrong. I'm in favor of gov't ...you can't run a country without it. It does assist in coordinating necessary services BUT gov't has MUTATED. The SERVENT has become the MASTER, and America is suffering because of it.

And finally CBO -you are correct, the gov't sucks up taxpayer money to justify their existence, and give handouts to dependents in order to buy votes. That reminds me of this very asstute saying. "If you rob Peter to pay Paul, Paul will ALWAYS VOTE FOR YOU."

The solution to our problems is to return to LIMITED Government, follow the law of the land (the Constitution), and restore the countless freedoms we have lost by eliminating the laws which caused the loss of our freedoms in the first place.

Thought for the day: "if we have more laws than other countries - are we truely more free ?" Honest Abe.

That's one function I don't have. Not sure how hard it is to implement, but I'll add it to my to-do list.

just write the comment in word first, then spellcheck, then copy and paste into the forum comment section. writing in word is easier anyways.

Or use Ubuntu.

Auto spellcheck for every and any text field. . . Nice, 'cause I cant spell for my life.

I have Ubuntu Linux on my laptop, and it's great, but that doesn't help the other readers. Mac also seems to spellcheck every text field.

I can't choose the server OS at my ISP. It's some version of Linux, but can't tell which one. Not sure if there's any spellcheck plugin for Wordpress, or maybe I already have it and just need to turn it on somehow.

Yesterday I coodant spel callig stoodint, to day I are won... (my fav)

Hi Patrick,

Is there a website that names and shames the perpetrators of the financial crisis:

Rubin, Geithner, Summers, Phil Gramm, Blankfein, Pandit, Alan Greenspan, Hank Paulson, Mack and others.

Perhaps, these people have no shame, so it is futile to shame them?

The funny thing is that while you and I argue about "right" and "wrong", the world moves right along past us.

I am a true believer in the economic structure of this country. From first hand experience, I can say that in this country you choose (actually make a decision) to either have it all, or choose to have nothing. If you want great income and a relaxed life style, you will notice institutions and resources available to boost you to your goals. On the other hand, if you don't have goals or standards for yourself, you'll find that it's really tough to even make a meager living. So you choose, which is the way it should be. Read below for my personal story.

I am an immigrant from Iran. I was brought to this country with nothing at the age of 8. My parents made a total of $1,300/month combined income for a family of 5: my older brother, me and my younger brother, plus my parents = 5 :) We moved here in 1987.

My youth was troubled. I found myself in juvenile detention facilities repeatedly (juvenile jail). I had many social and economic problems. In order to eat lunch at shcool, I stole my neighbors wallet. In order to play video games, I climbed into neighbors windows and stole their system. By 15 years old, I had entered Juvenile Hall over 8 times!! Finally, I was sentenced to a long 2.5 years and when I got out, I was nearly 18 years old.

As for my brothers, the older one stayed focus on school and he's now a an optamologist, a graduate of Harvard. My younger brother is well on his way to pro level tennis playing.

I operate an asset protection franchise and made over $200,000 this year. I drive a BMW, have the highest quality health insurance, have a fully funded retirement plan, live on the beach and all of this at the age of 29.

Moral of the story is that if you want better for yourself, this country, especially it's extreme capitalist economic policy (at least compared to the rest of the world) allows you to reach that level. If you want mediocrity, you can have that too. If you, however, have very low standards for your life, you will find that the entire country is designed to oppress you.

In what other country can you come out of a life of having absolutely nothing, to being top 1% earner? In what other historical political phenomena do we have a system that favors personal motivation and provides opportunity to achieve whatever you want in life?

Don't blame the policies of this country for lack of health care because a lot of people have excellent insurance. Ask yourself why you don't have that same quality health insurance. Don't ask the world around you why you're not satisfied with the here and now because that is found within yourself, not in any political or economic policy.

Work hard and you will achieve everything you want. And once you've achieved your goals look back to everyone else who has not, and you may realize that they too could have everything you have -- but they simply don't want it bad enough.

God Bless this absolutely wonderful country.

Maybe it would work better if the parents took an active part in their children lives. We need the services, but if we truly want our children to excel then parents need to play a larger role.

Another thing, we're not getting younger, only getting older. My goal is to buy as many as I can and as long as I can considering my income so when I'm older, I will have these passive income coming in. Guys again, we are getting older! Now we still work, can produce and make our fortune! Who gives a "f' if prices may come down !?! so what ?!? I wont wait 2 -3 years just to buy the property at a cheaper price. These are 3 years of my life during which I can build my self a portfolio. Don't you get it guys, people who dont try will never make it. Yes, its ok to lose some money on the way while trying! its part of trying!

Just the act of researching properties, taking on a commitment, managing my properties, collecting rents and building my wealth teaches me a lot! This is the best knowledge in the world. I have a BA in accounting and economics and master in law. Its not even close to what I have learned during my 10 years doing real estate.

Being somewhat new here, I hadn't read this from Patrick yet.

Ultimately, there should be no income tax at all, only a tax on land values.

Ah, a fellow Georgist! I'm a left-libertarian like Patrick but I'd like to think that if rentierism was punitively taxed we wouldn't need so much Socialism; people living on the other side of the tracks would only have housing expenses relative to the value of the improvements the occupy, not the whole "cash flow" of the property, which would enable them to divert more of their income to hopefully productive pursuits.

Henry George himself had no truck with the big-S Socialists of his day. Alas, we're a million years away from any Georgist solution gaining ground. The economics of it are too subtle, and like Patrick I see the conservatives have enough riot power now to muddy and dumb-down any attempts at intelligent debate.

DANAIY, wow, so inspirational. I think I'm gonna pull the trigger today. Sure the only thing we can afford after putting away for retirement, maintainance, and rainy day fund etc is 800 square feet in the gang buster area but hey it's a home to call my own. I will be so proud of my sh!tshack and my kids will no longer be considered homeless. Yeah, the schools completely suck in the neighborhood but who needs an education these days when they can learn on the streets of hard knocks.

Sorry, but Portland has a ways to fall. I will sit on my dp and wait and see the slippery slope of unemployment, foreclosures, and expiration of the housing subsidy continue to impact housing prices. Rents continue to drop around here, too, down about 20% in the neighborhoods I'm tracking.

I highly doubt the Fed will raise interest rates as things continue to look ugly well into 2010.

I, too, have researched my area and I'm very comfortable sitting and waiting.

Yes, good luck to all.

Leigh says

DANAIY, wow, so inspirational. I think I’m gonna pull the trigger today. Sure the only thing we can afford after putting away for retirement, maintainance, and rainy day fund etc is 800 square feet in the gang buster area but hey it’s a home to call my own. I will be so proud of my sh!tshack and my kids will no longer be considered homeless. Yeah, the schools completely suck in the neighborhood but who needs an education these days when they can learn on the streets of hard knocks.
Sorry, but Portland has a ways to fall. I will sit on my dp and wait and see the slippery slope of unemployment, foreclosures, and expiration of the housing subsidy continue to impact housing prices. Rents continue to drop around here, too, down about 20% in the neighborhoods I’m tracking.
I highly doubt the Fed will raise interest rates as things continue to look ugly well into 2010.
I, too, have researched my area and I’m very comfortable sitting and waiting.
Yes, good luck to all.

Here, here...well said. DANAIY...love ya man but while inspirational, your words are a bit "young." I am happy for you and your family...that you are in a position where you have the resources to buy up property and, perhaps, not care if you lose money. Some of us are not in the same position. For me, I've taken risks in the past and failed. You talk about looking back on your life when you are an old man. I look back on the last ten years and realize that due to my risk and subsequent financial failure, I just lost 10 years of earning time and potential.

All I am saying is it takes all types. That is why the math is sooooo important. It is objective and a universal criteria upon which we all can determine whether a particular purchase is wise or risky. Best of luck to you my man.

Badd speling is a cine of inteligense.

I would like to see usery on money outlawed.
I would like to see a 50 year jubilee - where all debts reset to zero every 50 years
I would like to look and feel like I did at 20, but be as smart as my grandpa was at 80

Patrick is a good dude. And Patrick.Net is a bigger blip each day. I just hope Barry's Brownshirts don't find us.

Thanks Patrick for the information on the evil rich. I never ever knew that the rich consisted entirely of those nasty, evil conservatives. Apparently, liberal rich like George Soros are just in it to help people and not enrich themselves. Funny too, how liberalism promulgates control by the state over individual lives. The liberalism of today is not classical liberalism at all, but is in fact a radical form of leftist statist control over the individual. True conservativism, however, does in fact promote limited government powers in conjunction with individual rights. When liberalism forces their social agenda on those that may not agree with it, that too is a limitation on rights. Admittedly, the term conservativism has been tainted as well, due to people like George Bush and his neocon ilk. Our founders, who were true classical liberals, wouldn't recongnize this obtrusive government that continues to grow regardless of which party rules.

LOL, born and raised in the conservative Midwest. Please tell me why conservatives are so demanding of their form social welfare via MASSIVE FARM SUBSIDIES!?!?!

Don't act like liberals are the only 'socialists' in this country.

Oh, and oil subsidies, WTF?!?!

RayAmerica, I have been in the US for only 5 years now, so yes, English is not my first language and I apology for having any typos or misspelling in my comments, i trust you native English speakers to be able to read between the lines and generate intelligent responds...

DINAIY .... my post wasn't aimed at you. I was attempting to make fun of those that mistakenly think that bad spelling necessarily means a lack of intelligence ... it doesn't.

DINAIY .... and by the way ... is you speak 2 languages, you speak one more than I do.

And some of us native speakers can barely speak or write in our primary language!

As an RN who works with a few Indian doctors I have learned long ago to read their notes, bad spelling and all. Heck, if you got into and completed med school in the US, you ain't no dummy.

Patrick, I'm a young CPA and have been investing in real estate for the last couple of years. I'm buying foreclosures right now in the SJ area. I read your website and find it very interesting. There is a lot of logic in what you present here but I think that you ignore one important key point here. Economy is all about psychology. Its not math. If we all think and behave as you suggest on your website, we can all kiss our dreams goodbye. Isn't dreams what we all live for? look at your self 20-30 years from now and ask yourself, what did I do with my money? I personally prefer to try and fail than not to try and keep my head in between my knees. Guys, money is nothing! don't be afraid to take a commitment on yourself (i.e. a mortgage), manage the risk and live better. A rental would never look and feel like your own home! its as simple as that. Its only money people. Care about your health and your family. ..! We should do as much as we can to support the real estate market. Go and buy properties, stop defaulting thinking about your own sake, think about everybody's sake.

i'm not suggesting that what was happening here over the last couple of years was right. This was all about greed. But now, its different. unemployment rate is easing, economy is picking up, i see more IPOs, better corporate earnings, hiring's picking up, look at the nasdaq!.

I agree, the real estate market is still sick and the recent stabilization is not real, mostly government assistance. SO WHAT! Government is helping real estate in the short run and economy improvement in the long run...! We will all together help reduce and fund the US deficit.

real estate market is not an isolated market. it is effected by the whole economy which is hopfully improving!, finally.

Bottom line, stop thinking how miserable and horrible and unfair our world is. Having gone through a terrible health issue with my son, I thank god everyday for being where I'm now.

I will keep buying real estate, hold it for 20-30 years and retire rich. Good luck to you all.

DINAIY says

There is a lot of logic in what you present here but I think that you ignore one important key point here. Economy is all about psychology. Its not math.

I disagree. It's all about lending. Most people will borrow as much money as they possibly can. House prices are limited only by interest rates and lending standards. If there is unlimited money to borrow, house prices will become infinite.

But now money is limited, and interest rates must rise, so prices must fall more.

Patrick, investing in real estate is an investment. You have to sacrifice your present for your future benefit. Renting may make sense today but the mind set of renters is a way different. You rent today, you most likely have more money in your pocket today which will be spent on retail consumption rather then investments and then what? Investing in real estate is a way of life, its learning how to save, being committed to something that you believe in and most likely self discipline. That is how you grow wealth.

I hope people are not that stupid as you describe Patrick. Cheap money is just one factor but also need to look at the numbers. I don't invest betting on appreciation. I put my money today in properties that make sense financially. I agree with your overall logic and theory but as much as there are still overpriced properties out there there are opportunities as well. Look for instance at San Jose which for the first time have cash flow properties. I'm taking about condo units which sell for $130-$160 and can rent out for $1,300-$1,400/month. There aren't much out there like these. All of them are foreclosed properties or short sales. I absolutely I agree with you, there will be more inventory coming in to the market, prices will go down in 2010 for the most part by 10%-15%, yet will the price on this specific condo units continue going down? I doubt it. Even if it will go down by another 20% within next 1-2 years from now so what? so instead of $160k it will be $130k? Rent will still be around $1,000 (job market is better then 2-3 months ago, corporate earnings' improving) its still not a bad investment. My advise to you all, yes it may go down by a little bit, but if you find a cash flow property in the silicon valley go for it. be patient. Its a long term investment. Sit on it for 10 years. As long as you can get it rented, you are safe.

DINAIY says

A rental would never look and feel like your own home! its as simple as that.

if I could reach ya, I'd slap ya. Trolly McTrollerson.

I'd rather live life as a renter in wonderful Portland than live life as a homeowner in a place I can afford, ie, Sioux City, Iowa, my home town, or anywhere w/in 1,000 miles of that place!

What is a life worth living if you are slave to your debt?!?!

Leigh,

I did some ecological research just north of Sioux City. Broken Kettle Grasslands, a Nature Conservancy project. As I recall the city did smell of a meat packing plant, but what else about it don't you like? Just wondering.

Bap33 says

DINAIY says

A rental would never look and feel like your own home! its as simple as that.

if I could reach ya, I’d slap ya. Trolly McTrollerson.

How in the hell could a rental not look/feel like your own home? A home is where you make it. I've had many rentals, owned a few houses. They all "felt" and looked like home.