patrick.net

It seems clear to me that when we're running budget deficits of 1T+ annually that very soon the people/governments buying our Treasury debt are going to demand higher interest rates. When our gov't stops buying the Fannie/Freddie MBOs as expected this spring we'll also see mortgage interest rates rise. With so many out of work, or working with reduced income that removes buyers from the market or forces housing prices lower.

I don't know about a Great Depression 2.0 with Hoovervilles in Central Park (because we do have a more involved gov't and social safety net), but a double-dip recession and downward continuation of housing prices does seem very plausible to me.

On another note, I just saw the CNN job market map:

http://www.cnn.com/SPECIALS/2009/map.economy/index.html

What I see on the map is downright scary, unemployment figures are getting worse every month, dispite what economists are trying to sell you on that things are starting to turn around. Interesting enough, unemployment didn’t spike until almost 3 years after the market crash of 1929, if you look look at our own market crash of October 2008, the market unemployment will not peak until around 2011.

If you look at the graph, unemployment was 6.2% in Septempter 2008, given that Unemployment was about 6% in 2003 during "the Boom" that pretty much in line with the average. From Oct to to Dec 2008, unemployment spikes up a full percentage point and from Jan to Mar 2009, unemployment spikes another 1.3%, and another 3 months passes and unemployment is up another full 1%. If you look at the 1930's graphs on unemployment, it was around 14% the same length of time after the crash. I say by the beginning of 2011, we will be looking at 14 to 15% unemployment, proably topping out at 17% by 2012. This crap is only going to get worse folks.

And stop blaming Obama, the stage was set long before Obamonics came into play. I don't beleive anyone could have stopped this train wreak once it began. We could have elected a president and full congress of ecomonists that traveled back in time from the distance future and with all there historical knowledge of how things would unfold wouldn't be able to stop the resession.

Recession hell, I say we will be calling this a depression in no time at all.

So have a nice day.

twelc says

But don’t you think Obama is in part responsible because he has focused so much on health care and not retaining or increasing private sector jobs?

What do you want, socialism? LOL. Obama's critics say he is doing too much, too little, who the hell knows.

The problem isn't with government, it's with over-investment (actually not investment so much as rent-seeking) in non-productive economic sectors. Like the $5.4B Tishman deal with Manhattan apartment deal back in 2005. Pension funds and the Church of England invested billions of dollars, along with a multi-billion government-backed loan from Wachovia, for Tishman to buy 11,000 rent-controlled apartments, boot everybody out paying a below-market rent, and raise the rents, making everyone rich.

Now that's f----ing productive. The bubble economy in a nutshell.

IMO we're going to continue to circle the drain until we directly address rentierism in this economy. And by address I mean tax the living s--- out of it.

Troy says

IMO we’re going to continue to circle the drain until we directly address rentierism in this economy. And by address I mean tax the living s— out of it.

Great idea. Punish landlords by taxing them into oblivion. If you punish landlords, you'll discourage real estate investments and construction of new rental units, which will create a shortage of rental units, which will in turn RAISE rents due to the economic law of supply and demand. Another fine example of why liberalism sounds good, but is a flop when applied to the real world.

RayAmerica says

Great idea. Punish landlords by taxing them into oblivion. If you punish landlords, you’ll discourage real estate investments and construction of new rental units, which will create a shortage of rental units, which will in turn RAISE rents due to the economic law of supply and demand. Another fine example of why liberalism sounds good, but is a flop when applied to the real world.

Real estate SHOULDN'T be invested in, I think that's the point. Homes are to live in. PERIOD.

Removing incentives to be a landlord means housing prices will decrease to where most homes can be owner occupied. What's wrong with that?

This time around we are competing with other people who make $10 a day and live in $30,000 homes.
I don't know if I've seen this discussed on Patrick.net that much. The unemployment rate is much lower for college educated individuals, but still going up. Notice that in this article the unemployed person being profiled was in a bubble related industry. Certainly, educated professionals are being squeezed, but not to the same degree as their lesser educated compatriots.
In November, the unemployment rate among workers with a college degree or higher reached 3.1 percent. While that figure is modest compared with the national unemployment rate of 6.7 percent -- and nowhere near the 10.5 percent unemployment rate among those without a high school diploma -- it hasn't been that high since 2003. Because the unemployment rate tends to lag behind other economic indicators, analysts think unemployment among college-educated workers is likely to surpass 4 percent, which would be the highest rate since the Bureau of Labor Statistics began tracking unemployment by education level in 1970.

PS - RayAmerica, did you even listen to what Troy was saying?

stocksjustgoup says

Removing incentives to be a landlord means housing prices will decrease to where most homes can be owner occupied. What’s wrong with that?

What's wrong with that is that there are a lot of people that aren't qualified financially to be a home owner. For a case study look into the housing bubble and subsequent crash. Eliminate landlord incentives, and you increase the rent for the remaining rentals.

RayAmerica says

Eliminate landlord incentives, and you increase the rent for the remaining rentals.

Rental market is remarkably inelastic to incentives actually. A given fraction of median income CAN be spent on monthly rental and that is that. Anything more is pushing a boulder uphill, people will double up or live in parent's basement or whatever it takes in order not to live RENT POOR. There is no evidence that FREEBIES for the landlord class do anything positive at all. Prop. 13 is a classic example of this, enormous giveaway to landlords which resulted in no reduction in rental prices.

RayAmerica says

If you punish landlords, you’ll discourage real estate investments and construction of new rental units

I propose no such thing : )

I would tax the land maximally -- proportional to its zoning -- and not one cent on the value of improvements. Parking lots and empty warehouses in desirable areas would be taxed away, yielded to developers who would build.

I have no moral problem with landlords per se. It's the community ground rent they collect for doing nothing that is the gaping hole in our economic ship. Landlord ROI should be based on investment in the depreciating asset. Everything else needs to be taxed away to discourage landlordism, the active enslavement of the actually productive members of society by the parasitical rentier class, those living off of capital returns instead of actual labor.

I will believe in real unemployment when the government sends the National Guard to hunt down 30 million Mexicans (= instant unemployment reduction by 300M/30M = 10% in addition to magically cured CA budget deficit).

As a side note, among the people I know personally so far I have seen that even laid off H1s, including Asians, found new jobs in a few months (even in winter 2008/2009). I also know a few people who worked on work visas for Lehman in NYC and London. Every single one of them is still employed in the same place, sometimes under a different company name (e.g. Nomura).