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We have bottomed...


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2009 Dec 5, 7:28am   28,658 views  127 comments

by Serpentor   ➕follow (0)   💰tip   ignore  

I've been hearing this repeated everywhere, even here.

how can anyone believe that crap when everything is propped up artificially, unemployment is still horrible, consumer sentiment is crap, and we are only here in this chart????

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64   Zephyr   2009 Dec 11, 6:17am  

Dadab,

The problem is that people bought big screen tvs, big SUVs, fancy vacation trips, restaurant meals and bigger fancy houses with the money that they should have been saving for retirement.

Foolish is as foolish does.

65   Zephyr   2009 Dec 11, 6:26am  

Illness and disability will force many (most?) to retire before they expect to.
They will live a modest lifestyle in retirement.

If your home is paid for you can be comfortable on Social Security - if you are not an extravagant consumer. My 80 year old mother lives well spending only her Social Security income. She has plenty of other money, but never needs to use it.

66   WillyWanker   2009 Dec 11, 6:33am  

Zephyr says

The sky has fallen as far as it is going to fall.
The bottom is behind us for the lower third of the market.

The middle market is bottoming now.

Higher end home prices will keep slipping during 2010.
With all the wild government spending and Fed printing of money, inflation is coming. The lower end market has been rising for a year now. We will never see those prices again. Ever.
There is more pain remaining for many. But, the end of the world has passed.

Great post and great follow~up posts, Zephyr.

I've purchased a few income properties in the past year and it seems as if more and more investors are coming into the market and the rock~bottom bargains are now a thing of the past (I'm speaking of low~end income properties). I'm an all~cash buyer but I'm not the only one out there. Seems as if quite a number of people were waiting on the sidelines to buy, or were able to sell off their portfolio prior to the collapse. I sold my investments a bit prematurely, 2004~~~but then I bought everything between '95 and '96 so I have lots of cash to play with.

67   EBGuy   2009 Dec 11, 7:04am  

It’s very local. San Jose has four or so new high rises all at less than 20% occupancy.
I saw on the news last night Alum Rock was closing schools. We having rising enrollments in our part of the East Bay, though. The Urbanization Shift appears to be picking winners and losers, although I still think even the winners will be facing a world of hurt.

68   EBGuy   2009 Dec 11, 7:06am  

compared to less than 6% today
Watch out for that deflation, though, real interest rates are higher than you might think. Well, at this point, I'm being somewhat hyperbolic as it appears CPI is headed back up (slowly).

69   Zephyr   2009 Dec 11, 7:28am  

WillyWanker,

Yes. You are on great path. Good luck to you.

I am also one of those all cash buyers.
And I have been waiting a loooong time for this market.

In 2003 I decided the prices were geting too high, as nothing looked good to me. In late 2005 I decided it was time to start selling. I did not sell everything (I wish I had). This year I started buying again (as I did in 1998 to 2003, after selling in 1989).

But I also play the market cycle in stocks. I sold almost everthing during 2007, mostly in the third quarter. One year ago I started buying stocks again, especially during the first quarter of this year. So far so good. I did the same thing in 2000, getting out before the market declined, and then buying back in during March of 2003. I like to follow and speculate on market cycles. And it has worked well for me for about 30 years now.

It is interesting to see so many people buy at the top, and then sell at the bottom.
During the bubble they think prices will never fall.
At the bottom they think that prices will never rise.
But it is cycle that keeps repeating itself.

70   Zephyr   2009 Dec 11, 7:31am  

"...as it appears CPI is headed back up (slowly)."

Always slowly at first.

Commodoties first, then goods, assets, and nominal wages.

The Fed has dramatically increased the money supply.
That will transform into inflation before long.

71   EBGuy   2009 Dec 11, 7:53am  

The Fed has dramatically increased the money supply.
The bubble vaporized a lot money. While I don't exactly sleep well with the Feds balance sheet hovering around $2.1 trillion, I'm not going to worry about the specter of Fed induced inflation until they hit $2.8 trillion. Commercial RE is the last to go, and, at least in my neighborhood, it's providing quite a spectacular show.

72   JboBbo   2009 Dec 11, 8:32am  

that graph looks like a double-dip recession. I hope TPTB have learned to "Just dip once and end it"

73   Zephyr   2009 Dec 11, 9:39am  

"The bubble vaporized a lot money."

Mostly it just transfered money from the buyers (and their lenders) to the sellers at the top of the market. Unfortunately many people lent money to the buyers so they were the real losers. But all of the "lost" money went to the sellers, and also to the people who sold other stuff to those borrowers who used home equity loans to buy stuff.

I agree that commercial RE has much pain yet to come.

74   EBGuy   2009 Dec 11, 10:07am  

Zephyr,
The vaporization I'm referring to (which, I'm pretty sure you understand) is the gigantic, gaping hole on the banks balance sheet (which is all a bit ethereal, as the money for lending was willed into existence by the miracle of fractional reserve banking). A lot this 'created' debt was then securitized, and, conveniently, has found a home at the Fed (to shore up the banks capital ratios).

75   The Original Bankster   2009 Dec 11, 10:29am  

notice that its all timed to end on 2012!

76   Bap33   2009 Dec 11, 10:35am  

Dec 21

77   Zephyr   2009 Dec 11, 10:38am  

Yes. The money vaporized from the perspective of those who lost it, for sure.

But the money actually went to the parties on the other side of the bad investments made by the borowers. So when I sold at the market top, I got money that the buyers borrowed, and now cannot repay to the bank. So it did vaporize from the bank's balance sheet, but I still have it. The bank has lost their ability to collect it from future income of the borrower. But the bank no longer had that money once they lent it to the borrower, and he gave it to me. So the vaporization was really a transfer. But nobody is following the full path of the "lost" money.

78   Zephyr   2009 Dec 11, 10:54am  

EBGuy,

Every dollar lent out by a bank had to first come into the bank as an actual dollar deposit (or investor capital). Banks do not "will" money into existence. Fractional reserve banking is a restriction on lending that limits the total of all loans to a ratio based on deposits.

Banks are limited to lending only 90% of their deposits. When that money gets deposited back into the bank, the bank can lend 90% of that same money out again. Ultimately this process can result in the bank having lent the same money many times over. But the bank also owes the same money to many depositors many times over. The net effect is that the bank has the same net worth that it started with (before receiving interest payments).

The official money supply measurement does not subtract for the various loans, and counts only the deposit side of the bank balances. It is a gross accounting, not a net accounting. So the real net value is not known, and not reported. The effect is that the money supply counts that same dollar like a new dollar every time it is deposited. So the recycling of the same money increases the measurement of the money supply. There is no magic, just incomplete accounting.

79   Serpentor   2009 Dec 11, 11:08am  

Zephyr, you still have not answered my question: how will the option ARM resets, shadow inventory, increasing NODs, horrible unemployment affect prices? how can you say prices have bottomed if the inventory is held back???

HOW WILL the prices be propped up?

80   Â¥   2009 Dec 11, 11:17am  

Serpentor says

HOW WILL the prices be propped up?

My ideas:

2.5% fixed for 50
10 year 1% IO balloon loans
Change the tax deduction to a tax credit
Wage inflation resulting in the median wage moving to $80,000.

Are of these are entirely possible, none likely IMO

It is true that we will see high interest rates if & when "inflation expectations" (FedSpeak for wage inflation) returns. As I've stated ad infinitum here recently, I don't see J6P having much bargaining power WRT wages this next decade and compression is the order of the day. Zephyr says consumer spending on luxuries will take the hit, which is possible, while I think/hope land values will (instead).

81   Â¥   2009 Dec 11, 11:20am  

Zephyr says

So the vaporization was really a transfer. But nobody is following the full path of the “lost” money.

This is an important point and explains the hot money on the sidelines looking for deals right now.

http://research.stlouisfed.org/fred2/series/MZM

82   EBGuy   2009 Dec 11, 11:25am  

But the bank no longer had that money once they lent it to the borrower
No, but they had the debt. And debt=money when you can securitize it and get it off your books. But you already know this (I think). We would not be in trouble (just a lot poorer from real wealth transfers -- which is what you refer to as the 'lost money') if the banks had securitzed (and sold off) everything. Quite a paradox; the problem was, they drank their own KoolAid and either kept some on the books or bought MBSes as investments.

I just read your most recent post, and, obviously we disagree -- I'm going to feel quite silly if you're correct (but hey, I'm teachable). I assert (with a 10% reserve ratio) that for every dollar deposit a bank takes in, they can lend out $9 (which is created supply). You say they can only lend out $0.90 (with dollars having to circulate through the system, redeposited in the same or different banks, many times to hit the 9x multiplier). Yours is definitely more sensible, but not my understanding (I'll see if I can find something from the Fed's website).

83   Â¥   2009 Dec 11, 11:28am  

EBGuy says

Yours is definitely more sensible, but not my understanding (I’ll see if I can find something from the Fed’s website).

http://en.wikipedia.org/wiki/Fractional-reserve_banking

84   Zephyr   2009 Dec 11, 12:06pm  

EBGuy,

Remember that assets must equal liabilities (even in bank accounting).

In bank accounting the loan is an asset (money owed to the bank),
and the deposit is a liability (money owed to a depositor).

85   LAO   2009 Dec 11, 12:10pm  

I personally know people that have made hundreds of thousands of dollars in the stock market since March Lows... The scary thing is that they are still Ultra-bullish.. And see the Dow quickly going back to 14,000 and beyond in the next year or 2.

I'm very skeptical of this since it makes no sense for the bubble to re-inflate so quickly... If that actually happened than people who went into a coma in 2006... would awake in 2012 to a fairly hefty profit margin. I find that hard to believe that someone asleep at the wheel would gain so much in a corrupt market.

86   knewbetter   2009 Dec 11, 12:24pm  

Everyone under water on a home loan right didn't release an equal seller who sold at the top of the market. Many people (idiots mostly) borrowed against their house like it was a second job, so follow the trail of lost money to the car depreciating in the driveway and clogging up the garage.

87   Zephyr   2009 Dec 11, 1:06pm  

"...so follow the trail of lost money to the car depreciating in the driveway and clogging up the garage."

The money went to the seller of the car, in exchange for the car.

88   Zephyr   2009 Dec 11, 1:31pm  

Serpentor,

The middle market and upper market will sustain more price slippage and pain due to a variety of factors, including the items you listed.

The bottom third has already bottomed, and there is strong demand for houses in that category.

The bulk of the damage is behind us. The problems you mention are real, but they are not new pressures on the market – they are lesser continuations of the pressures that have already driven the market down. In order for them to drive the market down further, they must be more significant than that which has already occurred. But that is not the case.

As to specific points, much of the option arm resets have already gone bad, so there will be no reset in those cases. The option ARMs were notorious for also being liar loans, and those buyers often could not afford the lowest payment option. Many of them have already defaulted for this reason, and the recognition that they are way under water and simply stopped paying on a bad investment. As I recall, the average option ARM was for about $550,000. So most of the remaining impact will affect higher priced houses.

In every down market there is a substantial shadow inventory waiting for a better market. This will slow the pace of price increases for a couple years as the shadow inventory emerges on any price increases. However, there is also shadow demand in those who have wisely waited to buy as prices were too high and then falling. In addition, most sellers (about 70%) are also buyers looking to trade up (or perhaps they will trade down now) so there is a substantial offset to the shadow inventory.

NODs are just one step in the default process that continues to bringing a flow of inventory. This will subdue the price increases we are currently seeing at the low end, and will contribute to the continued price declines in the higher end as I have mentioned in earlier posts and above.

Unemployment: The market cannot become healthy again until unemployment declines. I (and most economists) expect unemployment to peak soon, probably by Q2 of 2010.

Foreclosure inventory is moving slowly through the process, and is being sold. Any delays will defer some current pain into the future. This has the effect of reducing the severity of the decline while also delaying and initially subduing the recovery. We saw this effect in the early 1990s downturn as the RTC held massive inventories off the market, and slowly sold them over many years.

Currently the market could use more inventory for sale at the low end, where most foreclosures occur. Inventory to sales ratios have declined significantly over the past year as sales volume increases and inventory for sale declines. The market is approaching a normal balance by this measure. The downward pressure is fading.

89   Â¥   2009 Dec 11, 2:11pm  

Zephyr says

The middle market and upper market will sustain more price slippage and pain due to a variety of factors, including the items you listed.

The bottom third has already bottomed, and there is strong demand for houses in that category.

these two statements are contradictory. If the middle is slipping, then the bottom will also slip.

I agree that there are enough rent-seeking bastards to support any price level that cash-flows.

Unemployment: The market cannot become healthy again until unemployment declines. I (and most economists) expect unemployment to peak soon, probably by Q2 of 2010.

Unemployment is important, but what matters more is the wage base. Lots of useless real-estate jobs got us out of the 2001-2003 recession, but at the cost of of going deep, deep into debt. If those wages don't come back, then those valuations are not coming back, either.

As I've said many times, this isn't the 1930s, 40s, 70s, or 80s. No wealth creation, no wage inflation.

90   Zephyr   2009 Dec 11, 2:59pm  

"If the middle is slipping, then the bottom will also slip."

Simply not true. You have it backwards.
The low end of the market leads in the cycle.
The middle relies on trade up buyers from the low end.
The low end MUST bottom before the middle can recover.

Rental cash flow does provide a fundamental support level for housing prices.
And those "rent seeking bastards" are providing housing to those who cannot afford or choose not to buy it themselves.

Very easy monetary policy got us out of the 2002 recession.
But it resulted in excessive use of debt, and over-investment in real estate.

And now the Fed has gone wild.

91   EBGuy   2009 Dec 11, 3:19pm  

Remember that assets must equal liabilities (even in bank accounting).
Don't worry, I'm not totally off my rocker (I may have been thinking that the money was created by the Fed and extended as a loan, therefore, when the principal is paid off, the bank repays the Fed -- and the money disappears, with the interest going to the bank. ) At any rate, talk about a conspiracy, Reserve Requirements is "under revision" at the NY Fed.

92   Â¥   2009 Dec 11, 3:27pm  

Zephyr says

Simply not true. You have it backwards.

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the center cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

And those “rent seeking bastards” are providing housing to those who cannot afford or choose not to buy it themselves.

LOL. Such generosity! I have zero moral problem with investors profiting from the capital invested in creating or improving housing. Profiting from pocketing ground rents, however, gets my back up as a pernicious tax levied on the less well off. That the Brits had a name for this, "Buy to Let", sickens me.

93   thomas.wong87   2009 Dec 11, 4:22pm  

Troy says

As I’ve said many times, this isn’t the 1930s, 40s, 70s, or 80s. No wealth creation, no wage inflation.

If anything we are seeing wage/salary deflation. As is the case with the SF Bay Area tech industries which is common to manage margins. Even after 2002, cost control were fully in place,

In my neck of the woods, former VPs of Finance , Marketing, Engineering are not finding jobs. They are however consulting when they get something. I am talking about people with 15-30 years of experience unable to find full employment. Others have taken demoted positions from Corporate Controller to Accounting Manager position, and a 15-20% cut in pay. Or CFO to Controllership. This has put promotions out of reach for many staffers. It many be a long time for promotions to happen.

We will see a flat to down in wages and salaries.

94   Serpentor   2009 Dec 11, 4:34pm  

Zephyr says

Serpentor,
The middle market and upper market will sustain more price slippage and pain due to a variety of factors, including the items you listed.
The bottom third has already bottomed, and there is strong demand for houses in that category.
The bulk of the damage is behind us. The problems you mention are real, but they are not new pressures on the market – they are lesser continuations of the pressures that have already driven the market down. In order for them to drive the market down further, they must be more significant than that which has already occurred. But that is not the case.
As to specific points, much of the option arm resets have already gone bad, so there will be no reset in those cases. The option ARMs were notorious for also being liar loans, and those buyers often could not afford the lowest payment option. Many of them have already defaulted for this reason, and the recognition that they are way under water and simply stopped paying on a bad investment. As I recall, the average option ARM was for about $550,000. So most of the remaining impact will affect higher priced houses.
In every down market there is a substantial shadow inventory waiting for a better market. This will slow the pace of price increases for a couple years as the shadow inventory emerges on any price increases. However, there is also shadow demand in those who have wisely waited to buy as prices were too high and then falling. In addition, most sellers (about 70%) are also buyers looking to trade up (or perhaps they will trade down now) so there is a substantial offset to the shadow inventory.
NODs are just one step in the default process that continues to bringing a flow of inventory. This will subdue the price increases we are currently seeing at the low end, and will contribute to the continued price declines in the higher end as I have mentioned in earlier posts and above.
Unemployment: The market cannot become healthy again until unemployment declines. I (and most economists) expect unemployment to peak soon, probably by Q2 of 2010.
Foreclosure inventory is moving slowly through the process, and is being sold. Any delays will defer some current pain into the future. This has the effect of reducing the severity of the decline while also delaying and initially subduing the recovery. We saw this effect in the early 1990s downturn as the RTC held massive inventories off the market, and slowly sold them over many years.
Currently the market could use more inventory for sale at the low end, where most foreclosures occur. Inventory to sales ratios have declined significantly over the past year as sales volume increases and inventory for sale declines. The market is approaching a normal balance by this measure. The downward pressure is fading.

so as you say, the middle and the high end has a ways to do to drop then why did you say housing has hit bottom?

News flash it's the lower class that is getting the hardest hit in this recession. Manufacturing, service, and other low end jobs are going away. Middle class is suffering but is faring better then the blue collar types. Who's gonna buy up these lower end homes if everyone is getting laid off?

Most of these sellers are not going to be buyers, I don't know where you get your 70% number from but I think you pulled it out where the sun don't shine. There are plenty of figures on foreclosures and people who are underwater to know that 70% is a whole lot of baloney.

The lower end doesn't need more inventory, they just need the banks to start pulling them out of the deep pool of shadow inventory.

95   Serpentor   2009 Dec 11, 4:38pm  

thomas.wong87: on that same note, I'm also seeing industries that we thought was immune (biotech, medical device, research instruments, etc) starting to get hit with layoffs due to investment capital tightening up...

96   Â¥   2009 Dec 11, 4:51pm  

Serpentor says

Who’s gonna buy up these lower end homes if everyone is getting laid off?

Millions of Casey Serins looking to get back into the game of easy money. Wonder how his gold stock is going, LOL.

97   knewbetter   2009 Dec 11, 10:16pm  

Zephyr says

“…so follow the trail of lost money to the car depreciating in the driveway and clogging up the garage.”
The money went to the seller of the car, in exchange for the car.

Yeah, I guess eventually the money ends up with Kevin Bacon. Interest on debt for the car store paid to a bank.

98   Zephyr   2009 Dec 12, 1:51am  

Serpentor,

"...then why did you say housing has hit bottom?"

I said that the low end has hit bottom. Not the whole market.

"Who’s gonna buy up these lower end homes if everyone is getting laid off?"

Investors. And others as the job market recovers.
But this is not a forecast - the buying is happening now at the low end.

"...70% is a whole lot of baloney."

It is the normal market average. And that average will be the case again as the market recovers.

"The lower end doesn’t need more inventory..."

Tell that to the thousands of buyers who are having trouble buying a starter home because others are beating them to it. Many first time buyers are getting frustrated, as they get outbid on every house they try to buy.

I have been looking for rental properties and not finding what I want. The inventory is very thin (a fraction of what it was a year ago), and very picked over - like a department store the day after a weeklong 50% off sale. At the same time at the high end there are almost no buyers.

99   bob2356   2009 Dec 12, 1:59am  

Zephyr says

bob2356
The boomers will not die faster than the new births and immigrants replace them. The population of the US is expected to increase by roughly 100 million people over the next 25 years. So, real demand will grow.
And those who replace the dying are always from the bottom of the ladder, and they work their way up. All the people in the middle move up slowly as the oldest retire, and then die.
The replacement demand is already walking among us.

Yes and no. The replacement is about 3 million a year births and 1 million a year immigration so yes there will be 100 million in 25 years. What is missing from this equation is the huge bulge in demographics from the baby boomers. The so called pig in the python that has driven American culture for 50 years. The ratio of baby boomers to gen x's is very high 78 million vs 42 million vs about 60 million millennials. The agreement on length of generations is all over the map but about 15-20 years seems to be average. So there will not be nearly as many people in the income/life style position as the retiring boomers to move up into the baby boomers houses as they retire.

The population curve is actually hourglass shaped at this point. Probably a good thing for Gen X's considering that the job market has imploded and will stay down for a while. When and if the boomers retire (if they can) there should be large opportunities for Gen X's to move up quickly career wise. The bad thing is you will have a huge bulge of houses for sale at the top. The baby boomers, will be trying to sell their peak of career houses (read wet dream mcmansions) past the middle into the low end of the demographics curve. People who for the most part will be looking to buy starter homes or early career move ups.

Add in 15-20 million empty houses currently on the market along with record foreclosures again this year beating last years record and I don't see how we are at the bottom of anything. At least not the long term bottom. If I were investing in real estate again right now (sold everything in 2006) I would be very interested in starter/retirement homes in safe retiree friendly areas of the traditional retirement states. Just a thought.

100   Leigh   2009 Dec 12, 2:03am  

And keep in mind re: birth rates, the higher the level of income/education the fewer children you have. How many low income, generational poverty kiddos can grow up and buy that McMansion?

101   Zephyr   2009 Dec 12, 2:19am  

"Greenspan’s Fed allowing lending to go completely insane 2003-2006 was the main driver of the speculative blowoff."

Indeed the Greenspan Fed caused this spectacular bubble. But they did it unwittingly, by giving everyone a huge incentive to borrow as much money as possible - super low interest rates. The lenders went crazy because they could make big profits on the margin spreads and fees from selling the loans to institutional investors who were dying for a little more yield, and could get it by buying MBSs. There was a bubble mania in lending that fueled the real estate bubble.

Risk quality did not matter to any of them because they were confident that there would be no significant problems, and that the extra yields for subprime etc. would be enough to pay for the extra defaults that would come from the loose lending. They really did believe this. I personally talked with many of these wall street and institutional people during that time. The easy underwriting was motivated by everyone's exuberant greed chasing the super easy money.

So the Fed did more than just allow the lenders to be stupid - The Fed gave them a big profit incentive to do so.

Besides, they all believed that if things got bad Greenspan would just print more money to keep the game going (they called this the Greenspan Put). But the Fed took the punch bowl away during 2005, and then the money was not so cheap anymore. And the game started to slow down.

Market cycles are normal. But this one became a spectacular bubble because of the gasoline that the Fed poured on the fire from after 9/11 2001 until 2005.

102   Zephyr   2009 Dec 12, 2:34am  

Bob2356,

Based on current census data and forecasts, including immigration, the population will steadily grow during the next 30 years.

And examining the population profile by 5 year age bands (including mortality rates by age band) shows that the adult working age population will keep growing.

And the pop by age band multiplied by the normal household formation ratios shows that the number of households will keep growing.

And the number of households by age band multiplied by the normal home ownership rate by age band shows that the number of homeowners will keep growing.

I do think that the boomer bulge being followed by smaller cohorts will make the McMansions potentially in oversupply. At the same time if boomers look to downsize they will be doing so at about the same time that their children (the echo boom, another bulge) will be looking to buy their first homes. This could cause a shortage of smaller homes while leaving a surplus of McMansions.

Also important is the likely migration to warmer climates. This would exacerbate the surplus and shortages on a regional basis.

103   Â¥   2009 Dec 12, 2:57am  

Zephyr says

Market cycles are normal. But this one became a spectacular bubble because of the gasoline that the Fed poured on the fire from after 9/11 2001 until 2005.

The interest rate drops from 2001 through 2003 (8.5% to 5%) got the party started but it was "innovation" in mortgage products that kept it going once rates were adjusted upwards 2004-2006.

The Fed was putting the brakes on the larger economy but as the graph shows there wasn't much control authority (using the aeronautic term) over the mortgage market.

In 2006 a borderline-unemployed Casey Serin was able to waltz into the market and "buy" 10 houses, borrowing $2.1M from numerous institutions that are mostly no longer with us now.

Here's what Greenspan said about that, in 2005:

Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s

Part of the Fed's charter is to oversee the financial system. The Executive also has various alphabet agencies charged with this mission, but it can be argued that their failure falls more into the general active malevolence of the previous administration than garden-variety stupidity, perhaps.

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/22/AR2008112202213_pf.html

TMK, the Greenspan/Bernanke Put is essentially ZIRP. QE is actual monetization of the debt.

The problem going forward is running into the Liquidity Trap, where worthwhile, potentially productive borrowers are tapped out, leaving the extra liquidity to fall into speculators and other economic ne'er do wells.

We can helicopter-drop money, but unless it ends up in the hands of J6P, rents and housing values are NOT going to go up. We saw what speculation can do to energy: $4 gas was NOT good for J6P or the housing market, other than heightening the value of housing with a shorter commuting distance (but this is largely zero-sum since it is coming at the expense of housing further out).

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