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.

I don't know economics well, but what is the parallel of the law of gravity to the government inflating their currency? I don't know of any reason why the government can't print their way out of this problem. That's not to say it won't create different and worse problems down the road, but if that's their plan, what/who is going to stop them?

camping says

what/who is going to stop them

Mr Bond

I predict we'll be back to boom time in 2010. The big surprise is that people are back to behaving like the recession never happened.

FED will officially hold interest rates too low for too long and that will be the tipping point for higher inflation.

I think the housing market will hold current price level, or even go up little bit during the first half of year 2010. Then the last half will be very interesting. Somebody is gonna get hurt. LOL

Obama bitch slaps somebody before April.

Camping.

The point is that there is a practical limit to how far anyone can extend a ponzy scheme. The ponzies are you and me. A ponzy scheme assumes there are willing victims. If printing money was a good solution don't you think Zimbabwe would be a world power?
My predictions for 2010:

1. More bailouts
2. More foreclosures.
3. Increased interest rates.
4. Increased taxes.

For Christmas I would like to see Bernanke, Geithner, Obama, and Congress resign.

I predict in 2010 the Federal Reserve (and fellow travelers) will continue jawboning inflation, in order to keep money of the peasants circulating as much as possible. Admitting possible deflation, or encouraging SAVINGS would be the death of their sort of banking, and we can't have that eh what? Enlisting the peasants in their own impoverishment, by frightening them with terrorists.....err inflation is all part of the plan.

Actually, Zimbabwe proves my point. There is nothing preventing a government from printing money. Zimbabwe isn't better off for doing it, but they did it. Why can't the US? We have a ton of debt, why not inflate? And for savers waiting to buy, it's gonna screw us.

I don't know if you've noticed, but Zimbabwe is not the holder of a global reserve currency among other differences. I think you've made my point for me. Fed has everyone so terrorized that inflation is INEVITABLE and that bread is going to be $10 a loaf next week and their condo will be a zillion dollars that they will SPEND SPEND SPEND now in order to avoid watching their dollars (theoretically) evaporating later. Please explain what you mean by "printing money" (resulting in assumedly Zimbabwe chaos overnight). Will we all get a $100K check from the Federal Reserve for Christmas?

My prediction stands. In 2008 I kept hearing 2009 will be the year inflation really kicks in, except it didn't. But the fear-mongers will keep repeating that trick, trying to shake all the money out of the peasant pockets that they can. It wasn't that long ago that the commodity bubble terrorized people to the point that there was a RUN ON RICE at all the big-box stores with people buying as many large bags as they could. I hope the hoarders have their rice in proper storage, and are going to eat all of it, otherwise they were just suckers that wasted their money on a fear that never materialized.

No need for fear mongering actually the FED has been jawboning deflation to justify holding rates at 0% .
You can get a 10% return just by buying a rental property in Vegas. Prices could double and you'll still get a 5% return.
That's enough by itself to discourage people from saving.

how can inflation seriously set in when there is so much unemployment? inflation will only set when people start to get paid more. I suggest you go try to ask for a rise ....
Commodities and house price are derived from affordability (% of income).
We need true economic recovery, ie full employment like in the 70's to drive inflation.
Zimbabwe inflation is something else entirely, its a crisis of confidence. Nobody believe the government will be able to repay its debt. ( well actually they already defaulted http://www.jubileeresearch.org/worldnews/africa/zimbabwe_stop_paying.htm )

Camping,

That term your looking for is inflation. The law of supply and demand.

Bernanke's gamble is that the Fed can park trillions in the banks, buy mortgage back security's and US bonds. They are fighting a rear guard action to prevent the collapse of the housing market. Unfortunately, the problem is too big. Those naughty MBA's on wall street created a lot of debt.

The velocity of money has been low, not really moving in the economy (by design) which is what makes us different than Zimbabwe. He has been "successful" so far.

He will fail. Sooner or later people will figure out that the FED is the only buyer of government debt. The few other buyers will exit stage left.

Thats when the fun begins.

Just a note. I do not think any of this is really funny and I blame our government for letting it happen.

Vicente could you give an example of Bernanke "jawboning" inflation?

For the past 2 years he continues to denying it. Even to this day.
http://www.nytimes.com/2009/12/16/business/economy/16fed.html

I think you have it completely reversed. Inflation is the goal but they are not about to admit it.
The wealthy know this and are preparing for it. The poor are the ones who are in the dark about all of this and are about to get shafted once again.