patrick.net

There are so many bad things that can happen.

Eg. the 10 year moving through 5%. Given all the debt we have to reissue every month now I don't even want to think about it.

Wage inflation is only going to come via price shocks to the wage-earning population we call J6P. Back in the 1970s J6P could get cost-of-living salary adjustments with employers as the system inflated up & out.

But these days many J6Ps are competing with the Wangs and Kumars of the world making a fraction of US wages, and increasing personal productivity is making many office and industrial jobs redundant even without offshoring pressures.

Plus so much of our economy is BS consumption, marketing, F/I/RE, and that's not even considering the $700 billion we're spending on war. That's seven million $100K/yr jobs, with limited actual wealth creation that will benefit us in the future.

If the US of A had a 10-K, I think we'd have a Going Concern warning from the auditors.

E-man says

Home prices will increase 5% compared to 2009.

This is going to depend on prevailing interest rates. If they stay under 5%, perhaps. If not, I fail to see how this is going to be possible, unless other "affordability" measures are taken like outright payment assistance.

Bubbles never deflate in a straight line. The current bounce in home prices in some markets is almost entirely the result of artificial lowering of interest rates coupled with govt spending through tax credits and loose credit money with HUD. E-man makes an interesting prediction, but I'll take the other side.. home prices will drop 10% average nationwide in 2010 as compared to 2009 even with massive govt deficit spending to prop it up. The S&P will hit a euphoric 1350 on the "hope" that things are turning around before sliding below 800

Well, no one's gonna call you Nostrodamus for predicting what everyone else says - a smidge up, a smidge down. I'll say 25% price increase nationwide.

(I sure hope not)

What Zippy says sounds about right. Troy as well.

I would really like to know how much longer the government can keep all the all those balls in the air:

1. House prices
2. Money Supply
3. Bailouts
4. Fake GDP, unemployment and other statistics.

Anyone notice GM is offering 0% financing for 72 months? How do you feel about funding that?

What is to stop them? People in the streets are more worried about fictional "death panels" than they are of the gov't propping up housing artificially. Actually, it seems most people are happy about it. As long as housing looks ok on the surface (e.g. prices going up; foreclosures decreasing), the people seem to be ignoring all of the potential consequences.

I am not so sure all people are happy about it. Most feel they have no control.

Fortunately, I believe that there are certain laws like gravity are self enforcing. You are subject to the gravity regardless if you believe in it or ignore it.

All this nonsense will come to an end.

The movement that Glen Beck is the poster boy for will try to make subliminal messages, or maybe even overt ones, that the same behavior of Tiger Woods can be expected of President Obama.

inflection point says

Anyone notice GM is offering 0% financing for 72 months? How do you feel about funding that?

That's actually a good idea because it is funding actual wealth creation -- personal transport -- and hopefully more gas efficiency that lowers our collective wealth transfer to the unproductive oil exporters. GM isn't making a lot of money on its cars so there's no obscene profit margin being supported here, and cars do have a 6 year service life -- my 2000 Miata is still going fine.

The problem with 0% home loans would be the inflationary effect it would have on land values. I can comfortably afford a $350K place at 5% interest, but at 0% I'd want to borrow as much as I could -- at least $500K -- since most of the monthly housing cost would be going to principal. This would essentially double home prices, without any actual new wealth creation, since the cost of production of land is ~$0.

If I were King I'd focus on productive, wealth-creating enterprises. Mass transit. Construction of public spaces like schools, libraries, hospitals, parks -- you know, the New Deal WPA stuff. Increasing efficiency with urban traffic control, industrial R&D -- there's gotta be more inventions as useful as the internet we can seed & see commercialized.

The bottom line is that 10% of the country owns ~70% of the wealth. This is the major drag on becoming a more productive and prosperous society. We don't need to kneecap wealth across the board, but we do need to liquidate the rentiers among us, or at least sufficiently tax their parasitical business models to encourage them to find more productive uses of their capital.