By Peter P
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2006 Mar 14, 12:32pm
15,979 views 173 comments
Let's try to visualize the bursting of the housing bubble. Tell us what are your visions. Tell us how a correction towards normality is good for the economy in the long run.
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In this fantasy, the event that triggered it was kinda peripheral, sorta off most folksâ€™ radar screen: politics in Venezuela. Well that exact scenario might be far fetched but the point is that that the â€œitâ€could be something most of us overlooked.
Great to see people can waste hours of time carefully constructing incredibly finely crafted but unlikely fantasies based mostly on US-centric prejudices and self-interest, denying the democratically elected Chavez any kind of credibility, suggesting he will become a dictator, when the US happily propped up right-wing dictators like Pinochet and Noriega, and itself trained thugs, murderers and assassins at the SOA and WHISC inside the US for years for its own narrowly-defined geopolitical self-interest.
It's right in pointing out that the encirclement of Cuba by embargos holds it up and stops it from developing better.
Increasing gas (oil, petroleum, gas, by-products) prices is one real-world variable that could bring it all down. A la the oil price shocks of the early 70s when OPEC upped its prices, causing Recession and consequent inflation and unemployment in the West. The price of everything goes up with oil - cost of freight, cost of heating, power stations, cost of personal and public transport, cost of all the chemical byproducts from oil such as plastics, creams, etc... Just depends how long higher prices last... Makes the US even more determined to drive through its agenda in Iraq and the Caspian Sea (Afghanistan), tho...
that's right, HARM. the US does everything the right way, that's why you're so popular around the world... it's so wonderful that you have no housing affordability crisis at all, and your welfare state is the best, which is why no-one declares bankruptcy from medical bills, and no-one is homeless.
the rest of the world has got it all wrong. i may be ranting, but perhaps for good cause. i think i've clearly articulated my position, i HAVE listened to others, and i think your comments are completely unjustified.
A progressive tax system will only invite tax shelters.
A flat tax system may also invite tax shelters - the very rich may well try to go on to still avoid tax no matter what the rate. It's up to the govt to enforce the system, stop evasion wherever possible, and educate the public into the very good reasons why everyone beneifts from progressive tax, how those who have far more than they need to live comfortably, and who obtained their riches from everyone else paying them, therefore ought to put a little more back into the system that has clearly benefitted them so much.
This presumed 'flat tax' post is one of the more selfish ones that completely contradicts the other poster who said how so many people love giving all their money away to charity. If everyone loves giving to charity, then why object to progressive tax that helps others out more systematically and reliably?
Once again, which way do you guys want it in your self-contradictory belief systems? (Bill Gates is to be commended for his generous donations to charity and research, by the way, which he is not obliged to do. Larry Ellison of Oracle, on $18 bn, however, is not so forthcoming.)
in France [...] over a certain income the government takes such a high percentage that there isnâ€™t much financial incentive to work super long hours.
hmm, well, if they're already earning over a certain amount, I don't know if they need to work super long hours. the general labour movement argues, for quality of life reasons, that no-one should be forced to work super long hours anyhow, given that we don't actually need to, being clearly able to rack up a huge surplus 'n'all. (except for the survey I read that the working poor have the worst sex lives of anyone, due to their long working hours and life stresses.) the french actually capped the working week to 35 hours by law, as an attempt to spread the work around, but that does not stop middle managers from actually working much longer because their higher ups expect it. the french labour market has a few structural problems, as per the recent announced changes and riots at the sorbonne - apparently people virtually hold jobs for life, which means progression on seniority, some inefficiencies, and lack of access to jobs and training for the next generation. however, the proposed changes are that employees are on probation for the first 2 years of their jobs, and can be sacked summarily within that period with no explanation and no 2nd chances or feedback for improvement. have to look into all that further, though, they have problems with a huge influx of unskilled migrants as well...
now we can do germany, UK, eire, sweden, norway, austria, spain, portugal, denmark, finland, italy, poland, czech republic, switzerland, luxembourg, belgium, canada, australia, NZ......
there are comparative studies and rankings out there on all the aspects of the welfare systems of the affluent OECD countries, I haven't bothered referencing them in any of these posts, it's been a while since i looked at them...
Bill Gates is to be commended for his generous donations to charity and research, by the way, which he is not obliged to do. Larry Ellison of Oracle, on $18 bn, however, is not so forthcoming.
I agree. I am a big fan of Bill Gates. Larry is not my favorite.
in DS-world, weâ€™re all culture-war neo-cons and market fundamentalists.
not at all. i think that whole post represents an exaggeration. i've only questioned the logic of views of market fundamentalists. and maybe libertarian fundamentalists. why would i question the views of some of the more thoughtful posters here i agree with? i've put forward alternative views of the 'perfection of the market' theorists to try to show up its weaknesses and inherent contradictions and human rights problems. is that a crime? people are wandering all over the socio-economic terrain in their posts, so there are no limits on the discussion topics. and it's not easy to critique 'grand meta-narratives' that the elites and right-wing thinktanks have devised in a short space either. in fact, many of the posters who are ruthless market fundamentalists in print probably (hopefully) don't behave that way in practice. i don't believe that i'm the rush limbaugh of the left, although the left certainly needs several to balance out the Fox stable - i can only think of 'lies, and the lying liars who tell them'. i must say, though, that the attitudes of the limbaughs and coulters and hannitys and neocons and NRA and all the rest are really inconceivable and seen as quite bizarre in most other comparable countries, including some you assume are allies and culturally similar. people are not hearing good things about your country outside of it, in general. it's the sometimes incredibly nutty statements i've read here that trigger my concern and sometimes an escalation of views...
foreclosures are at a record high in sydney, for the last 2 years, in fact - could be a harbinger... mainly young investors gettnig burnt, who heard something from a spruiker about getting rich quick in property...
rents weren't high enough to cover the interest bill...
In At the Rise Says: March 15th, 2006 at 11:26 am
After another a year of incredible home appreciation since Spring of 2006, home prices seem to be gaining momentum for another rise again. The 50 year loan is introduced making it easier for families to afford the new averge price of 742,000 for a home. Over 200 new bubble blogs have emerged to accomodate the newly created mass of renters that missed the wave again.
IATR may be being droll... The interesting thing is that house prices ultimately have to be underpinned by wages and salaries (or equivalent earnings). The banks will only lend where you can demonstrate you are able to meet repayments based on income, altho they have liberalised lately. Even landlords are limited by the wages and salaries of their tenants in terms of how much to pay for an investment property without committing economic suicide. So there is held to be an automatic cap on housing inflation that will kick in eventually - or else you will see massive upward pressures on wages to compensate instead = inflation. The 'illogical economics' market reality is the 'irrational exuberance' effect of speculators and the panic buying effect of young people who don't want to miss out. The actions of RE agents and others make sure that prices immediately fill any vacuum, due to the nature of the selling process. In some other postulated society, profiteering from real estate might be seen as immoral, as charging interest on a loan is proscribed in the Qu'ran, for instance...
i may be ranting, but perhaps for good cause. i think iâ€™ve clearly articulated my position, i HAVE listened to others, and i think your comments are completely unjustified.
You are obviously passionate about your beliefs, and while I don't share all of them, I don't fault you for believing what you believe. Where I think you started to cross the line was in making personal attacks on other bloggers, based on blind assumptions. Peter P is clearly Libertarian-leaning in his economic views, as am I (though not as strongly).
Many here are fiscally conservative (this is a bearish blog, after all). Almost none of us, however, are pure market fundamentalists and/or anti-government extremists. You may want to re-read the points made in the "Libertarian" thread. Don't be so quick to assume that everyone here speaks with one mind/voice regarding every issue. We represent a fairly wide ranging political/social spectrum. Anyone posting here will read many things to disagree with, as well as many things to agree with.
Many of us are also socially liberal (myself included) and believe that government, while not the answer for everything, should provide certain services essential to the well being of its people. I believe that some forms of market regulation can --if well designed-- can help promote economic and social stability, and to smooth out some of the inequalities that inevitably result from pure, unregulated capitalism.
When it comes to adding more government regulation, however, the devil is in the details. There is always a very real problem of creating new moral hazards (unintended consequences) by incentivizing/subsidizing certain activities above others. The housing bubble, I believe, is itself largely a consequence of moral hazards caused by Fed interest rate manipulation, GSE risk underwriting, and a powerful pro-housing bias in American tax laws. When the public decides that the government should regulate something, I think it should take care to be sure that the "cure" is not worse than the disease.
The fact that I or Peter P believe the above does not automatically make either one of us a sociopath, though you may feel otherwise. I have shared this blog with Peter P practically since its inception. We have shared our opinions on a wide range of subjects, and I can tell you he is not an evil person. He may be bit shy when it comes to discussing issues of morality or religion, but so what? Many people are shy when it comes to those topics. Maybe he's just more comfortable discussing economics and housing, I really don't know. Regardless, this doesn't give you the right to make assumptions about people you barely know.
Now, if you'd like to continue to post your opinions here and debate other bloggers, you're welcome to do so. However, I will ask that you keep your comments civil and not engage in needless personal attacks. If you find certain views expressed here "nutty", then by all means rebut them. Just attack the argument, not the person.
The housing bubble, I believe, is itself largely a consequence of moral hazards caused by Fed interest rate manipulation, GSE risk underwriting, and a powerful pro-housing bias in American tax laws.
I'd agree with that, although the bubble is occurring in a dozen countries at once - altho US interest rates tend to affect the rest of the world, and lenders are global institutions nowadays. The Oz govt encouraged investment borrowing by reducing capital gains tax on investments and allowing deduction son investment losses, leading to a spruiker/guru's paradise, the rise of massive greed and selfishness in those who already had some equity, etc. as documented elsewhere here...
I've also noted elsewhere that central banks only have one lever left these days, being interest rates - not exactly a multi-faceted instrument to finely tune an economy.
I stand by my comments in defence of human life and a more civil society being contructed through positive welfare measures. I've noted that the incarceration rate in the US is some 6-10 times the rate of comparable countries, and higher than Russia. Please read bap's inflammatory comments starting the ball rolling if you want to know why I get progressively more upset with certain attitudes. I have no sympathy for people worried about not being able to buy a $2m house who in turn do nothing and feel nothing for people less fortunate than they are.
All governments are armed robbers. The only role of the government is to leave us alone, disappear, run away, or die.
I have no sympathy for people worried about not being able to buy a $2m house who in turn do nothing and feel nothing for people less fortunate than they are.
Nor do I. The only caveat I would add is, public assistance for the able-bodied/able-minded should be limited to the "hand-up" type and geared towards weaning people off public assitance when they are abke to sustain themselves. I have seen far too many cases of generational welfare. While this doesn't represent a majority of those receiving aid, it has a corrosive effect on society and clearly undermines the incentive to work and to become self-sufficient.
Ditto for corporate welfare --if a company cannot stay in business without perpetual government aid, then it should be allowed to fail and be replaced by a company with a more efficient business model. Taxpayers are actively subsidizing losers, which hurts our competitiveness and economic health in the long run.
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