patrick.net

tatupu70 says

Unless of course you invest in TIPS. Or money market. I guess you can invest after all.

You're assuming they account for inflation properly, I don't believe they do. Money market has similar issues of manipulation.

tatupu70 says

Wrong again. Inflation hurts the rich more than the poor.

The rich have the resources to avoid the effects of inflation. At worst they'll loose a few per cent of their assets, but so what? If you've got tens or hundreds of millions of dollars you won't even notice it.

tts says

The rich have the resources to avoid the effects of inflation. At worst they’ll loose a few per cent of their assets, but so what? If you’ve got tens or hundreds of millions of dollars you won’t even notice it.

Not really. Most wealth is held in the form of debt instruments (deposits, money market funds. bonds), which have their value eroded by inflation. Stock do not perform particularly well in high inflation, since it wreaks havoc on an economy. Gold on a very long time frame holds up to inflation, but in any given decade may be out of favor, and is thus not a very good store of value. e.g. gold lost real value during the 80's and 90's.

Real estate is probably the best place to hide from inflation, but then you have to take notice that among the non-rich, real estate is their biggest asset class, so they are more protected than the rich. Throw in the fact the non-rich have more debt than the rich, and they fare even better.

You'll get no argument from me on the Huffpost article.

Speaking of deflation: my auto mechanic's hourly rate fell from the bubble peak.

EBGuy says

Speaking of deflation: my auto mechanic’s hourly rate fell from the bubble peak.

Speaking of inflation; my McD's breakfast went up since the bubble peak.

I think we’ll see a recovery when we get some real job and wage growth and when prices on homes drop to something much more reasonable vs. those wages (say around 3x or less local avg. income).

Even in 2000 the avg. income in my area (orange county) was about 58K, the house in my are sold for $280K thats 5x. Now it's probably about 75K, houses average 400K so again 5x. At least locally I don't think we will see that happen any time soon.

MarkInSF says

Not really. Most wealth is held in the form of debt instruments (deposits, money market funds. bonds), which have their value eroded by inflation.

That is where their money managers come in. If their wealth is tied up in risky debt instruments they just have them sell it and move into other assets. It could be commodities (doesn't have to be gold, oil or nat. gas or wheat will work just as well), it could be foreign investments, whatever.

MarkInSF says

Real estate is probably the best place to hide from inflation, but then you have to take notice that among the non-rich, real estate is their biggest asset class, so they are more protected than the rich. Throw in the fact the non-rich have more debt than the rich, and they fare even better.

Mortgage debt is not wealth, particularly when it is against a declining asset. Most non-rich have little to no savings (why try to save when debt was so easy to get during the bubble, especially when things like homes were too expensive anyways without massive levels of debt, trying to save for a 20% down payment on a $300K+ home when you only make $50K or so a year is too difficult for many these days anyways), and they're also saddled with huge amounts of credit card debt (just how are those interest rates now anyways?), school debt, car debt, and maybe even some medical debt.

Those who are non-rich also have declining wages, and prices are slowly edging up for most everything (still high for oil...very alarming IMO), and getting more credit is almost impossible for them now.

Even if you inflate away half that debt these people are still screwed. They're still going to lose their homes, they're still going to have massive declines in their standard of living, and they'll be stuck like that for years at a minimum. Almost certainly for the remainder of this decade. Possibly even decades.

The rich on the other hand....lets say they do horrible, and somehow lose 50% of their wealth. What if they started out with 10's of million, hundreds of millions, or even billions? How about if it was "only" a million or "just" a half a million?

By any reasonable measure these people will _still_ be rich. They'll still have hundreds of thousands, tens or even hundreds of millions of dollars.

Oh they might have to sell or go into foreclosure on one or two of their homes, or maybe even just the one home they've got, but they won't have to worry about not having a roof over their heads period.

They might have to sell the Bentley or Porsche, but they won't have to worry about downgrading to a Mercedes Benz much less a Camry, or even wether they'll be able to afford a car at all anymore.

And they almost certainly will not be able to afford to make it rain Cristal in the club every other night or week end like they used to, oh no, they'll only be able to afford that once a month or so tops.

What a heavy burden it is to be rich, makes you wonder why any one would bother right?

pkennedy says

They can’t save, but they can sure get out of debt fast.

Even if their debt is effectively cut in half or less many still are well over their heads in debt.

Even worse, though their total debt load is decreased their ability to pay is reduced to via inflation without a proportionate increase in wages, at the same time goods go up in cost. Its debt serfdom all over again. This disproportionately effects the poor BTW.

pkennedy says

Middleclass home owners - Now inflation is eating away at their mortgages. They can pay off their mortgage way faster.

Only if their wages go up, otherwise they're worse off.

pkennedy says

Rich - If they have money, they have to dump it fast! If they have investments holding mortgages, they have to get rid of those fast, and get assets!

All of which is easy for them since they can afford competant and experience money managers. But lets say they don't move fast for what ever reason and lose half their money. So what? Sure you lost half, but if you started out with 10's of millions or even a "mere" million you're still doing a whole lot better than the average Joe or Jane Sixpack who if the Fed and government has their way will not raise wages while trying to inflate away debt and reducing entitlements and reduce services and raising taxes. Bear in mind that for most of your average Joe and Jane Sixpacks nearly all their wealth is tied up in their home value, and their sole way to extract that "wealth" was via more debt, and they were generally encouraged to do so during the bubble. They are going to be left twisting in the wind by the actions of our elites and government.

pkennedy says

If banks collapsed, new ones could take their places easily. Bankers would have a field day!

Not if they ended up in prison or were specifically barred from opening up new banks due to unethical business practices.

pkennedy says

If the market is empty, it’s easy to create a new business. If you’re competing with wells fargo/citi/boa, it’s not that easy.

The only reason its difficult to compete against these big banks is because its been decided that they shall not fail.

pkennedy says

If inflation kicks in, they’ll be hurting even more as all their hard earned good mortgages turn less and less profits.

When inflation kicks in they'll just get bailed out again. Too big to fail remember.

pkennedy says

As far as letting everyone fail and start over and “perhaps” it wouldn’t have been any worse. Why take that risk? Destroying a world currency, destroying the confidence that lenders give us? Destroying consumer confidence? Why take that risk?

Its not a risk, its necessary to have a recovery, you can't hide your losses forever. As for confidence from lenders and consumers, that has already been destroyed, no one with any sense believes what the government or the Fed says these days. They can Jawbone til' the cows come home, but when push comes to shove they'll act to save the entrenched interests at the expense of the poor and middle class every time.

chrisw says

Even in 2000 the avg. income in my area (orange county) was about 58K, the house in my are sold for $280K thats 5x. Now it’s probably about 75K, houses average 400K so again 5x. At least locally I don’t think we will see that happen any time soon.

I would view that as a sign that even then your market may have been in a boom.

I know that prices in CA have always tended to be higher than other states but that is still just too much IMO.

The rich care if they lose 50% of their wealth. Those mistakes hurt them over the long run. Someone who's house inflates in value due to inflation doesn't lose anything. Real estate is the best place to hide money.

Rich aren't out to make money. They're out to CONSERVE capital. It's really hard to take 50B and try and conserve it. Where do you put that kind of money? Try and find good businesses that you can buy and hold and work with. The rich do hire great money market managers, and their job is to conserve money. Hopefully keeping up with inflation.

Why do you think Warren Buffet stopped investing peoples money, and instead turned to Bershire? He buys companies, because for the most part, he can't own stock in companies anymore. He got to a point where he couldn't buy stock in a company without taking it off the market. When that happened, he dumped managing money and just managed Bershire. He used that company to buy all kinds of companies. He doesn't buy and hold because it's good, he buys and holds because it's the only thing he can do. He said if he had only a little money tomorrow, he could get 50% returns on it, because the market has lots of potential, but not when you're got billions to invest. The game changes.

The rich are playing a totally different game.

When push comes to shove, the chinese are still buying up our treasury bills. When push comes to shove and the US economy looks flaky, people RUN to the USD and buy it up. WHY? Because it's still a better bet than any other country they're currently invested in. If the US is having troubles, the world is about to have them too. Even if the world hasn't been hit, people run to the USD for security.

People say oil is traded in dollars and for how much longer. Until there is a large more stable currency. When will that be? Probably not in our lifetime. No other currency is large enough, or used around the world in sufficient quantities. Look at the euro! Individual countries are needing bailing out. They've got some serious issues over there of their own. The chinese are a big economy, but they need to grow by probably 5X before anyone will take them seriously (yes, thats far larger than the US), and that's because the US has a known history.

YES we might have spent trillions to stop banks from failing, but that is exactly what the rich want. They want an economy that isn't going to wipe them out. They want stability. They want the USD. Other countries want this as well. OIL is in the USD for a reason.

Speaking of inflation; my McD’s breakfast went up since the bubble peak.
Huh? Dollar Menu.

pkennedy says

The rich care if they lose 50% of their wealth.

I'm sure they'll be very upset, I was pointing out that it doesn't really matter since they're still actually rich, and not just a little bit either.

pkennedy says

Someone who’s house inflates in value due to inflation doesn’t lose anything.

Sure, but that isn't what is happening, housing prices are still going down for most if not the vast majority while their ability to pay the debt down is being reduced.

pkennedy says

Rich aren’t out to make money. They’re out to CONSERVE capital. It’s really hard to take 50B and try and conserve it.

I'm sure it is and I'm sure for many that is their goal. What I was trying to point out was they can lose massively yet still come out far ahead of the non-rich, who are the ones who well and truly getting reamed out here. If a rich guy loses a billion dollars but has another billion where that one came from I'm sure he'll be livid, but what really changes for him? Look at the avg. Joe who makes ~$50K, you cut his income effectively in half but leave him strapped with debt and just what exactly do you think happens to his quality of life and his standard of living? What do you think will happen to those who earn even less then that?

I don't hate the rich, but I don't have much sympathy for someone in that position where they have so much wealth that they literally don't know what to do with it and can lose so much of it yet still be rich.

pkennedy says

When push comes to shove, the chinese are still buying up our treasury bills. When push comes to shove and the US economy looks flaky, people RUN to the USD and buy it up. WHY? Because it’s still a better bet than any other country they’re currently invested in. If the US is having troubles, the world is about to have them too. Even if the world hasn’t been hit, people run to the USD for security.
People say oil is traded in dollars and for how much longer. Until there is a large more stable currency. When will that be? Probably not in our lifetime. No other currency is large enough, or used around the world in sufficient quantities. Look at the euro! Individual countries are needing bailing out. They’ve got some serious issues over there of their own. The chinese are a big economy, but they need to grow by probably 5X before anyone will take them seriously (yes, thats far larger than the US), and that’s because the US has a known history.

I'm sorry but I'm just not that confident the ability of our government (or for that matter other governments) to manage things competently or not screw them up further. History is full of instances of catastrophes, I see no reason why we can't have another.

Take average joe, take his 50K, all his stored up credit card debt, a mortgage he can't afford and wipe it all clean for him.

Take average rich guy and cut his wealth in half.

Who walks away, better off? The point is, the rich aren't interesting inflation. It's a nightmare for them. The poor might not be happy right off the bat, but they will be. SOMEONE is paying for all that debt to go away. If the poor aren't, then who is? The rich.

The USD might not make you comfortable, but it makes a lot of people comfortable, and the currency is stable because it makes a lot of people comfortable and they all use it. As long as the majority are happy, it will be stable. We're not going to change to a new currency in the US. China isn't going to try anything, the EU isn't going to try and take over, OIL isn't going to change. There are just idle threats or comments made by people coming up with end of the world scenarios. In reality, no one wants it to change. What you consider a mess, most consider a slow marching path that we're on, and we're deviating up and down a bit from good to better to bad, but we're not swinging wildly up or down like all other currencies out there.

pkennedy says

Take average joe, take his 50K, all his stored up credit card debt, a mortgage he can’t afford and wipe it all clean for him.

But that isn't what is happening, their debt usually isn't being totally wiped out, perhaps reduced some. Also you left out the effective wage decrease that inflation without adjustments brings and rising costs in everything else.

pkennedy says

Who walks away, better off?

Even in your example the rich person would still be better off since he would still be rich. Less rich, of course. But still rich.

pkennedy says

The point is, the rich aren’t interesting inflation. It’s a nightmare for them.

I'm sure they'll be less than thrilled with the few percent or perhaps even 10's of percent that they may lose, but they likely will end up making little or no changes in their lifestyles, quality of life, or standard of living.

pkennedy says

The poor might not be happy right off the bat, but they will be. SOMEONE is paying for all that debt to go away. If the poor aren’t, then who is? The rich.

The non-rich will still be non-rich even if you took away all their debt, which won't happen, but even if that happened without the appropriate increases in wages to accommodate the inflation the non-rich would eventually end up destitute. Go look at what has happened in other countries that have had high inflation without the necessary wage increases like Argentina or Mexico, vast amounts of poor people (and not just a little poor either) with a very tiny middle class and an even smaller amount of rich people. That is our future as I see it at this point.

The rich will end up paying for little or nothing, if anything they'll get even richer and get even more influence over our gov.

http://tinypic.com/r/x276ur/5

pkennedy says

The USD might not make you comfortable, but it makes a lot of people comfortable, and the currency is stable because it makes a lot of people comfortable and they all use it. As long as the majority are happy, it will be stable.

I said government, not dollar. I think you attribute too much to confidence. You're essentially saying (and I've heard this before) that the dollar will be fine because everyone thinks it will be and so the dollar will be fine.

This is circular logic and I mistrust it everytime I see it. Don't get me wrong, confidence can be a good thing, but only when it is backed up by facts and solid fundamentals. If its not, then what you have isn't confidence, its delusion. A fantasy at best.

pkennedy says

but we’re not swinging wildly up or down like all other currencies out there.

http://tinypic.com/r/xclllk/5

pkennedy says

In reality, no one wants it to change.

I'm sure they don't, but no one seemed to want the bubble to pop, or any other catastrophe to happen either. What people want and what actually happens are often two different things unfortunately.

The rich aristocracy won't get wiped out by inflation. They are the ones who are able to move their money in and out of the country in a matter of minutes. Hell, their buddies in the New York Fed probably tip them off on market decisions half the time so they already beat the hordes out.

In the past, the aristocracy used to sell their stocks to the general public before they crashed. This time, they were so stupid that they held on to them while their portfolio crumbled down to zero. Rather than eat the losses, they found a way to force the public to buy them. It was called the TARP. The rich already got wiped out in 2008. The Federal Reserve found a way to make them richer.

ttt--

Your argument makes no sense. The point is inflation is worse for the rich than it is for the poor or middle. Of course it won't bankrupt a billionaire--but that is irrelevant. It will hurt a billionaire more than it will hurt an average Joe with a large mortgage and credit card debt. That is all I'm saying.

And you're forgetting what inflation is like. Housing prices will rise during inflation--that is pretty much the definition. Prices rise. And wages will rise as well. Keep that in mind when you're making your arguments... Neither of these things is happening now, of course, because we're not in a period of high inflation right now. Just the opposite actually--very close to zero inflation. Some even have called it deflation.

tatupu70 says

And you’re forgetting what inflation is like. Housing prices will rise during inflation–that is pretty much the definition. Prices rise. And wages will rise as well.

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

Wages rising is not a given. See "stagflation".

As Whitney and others have said, credit and "special assistance" contracting does not forbode an expanding "money supply" in this universe.

tatupu70 says

Of course it won’t bankrupt a billionaire–but that is irrelevant. It will hurt a billionaire more than it will hurt an average Joe with a large mortgage and credit card debt. That is all I’m saying.

How will it hurt them? Oh they may lose (I still doubt they'll lose anything, I was tossing out the 50% as a ridiculous example FYI) lots of money, but how will they be _hurt_? What sacrifices will they have make in their life to accommodate their supposedly dramatic decreases in wealth if they've still got hundreds of thousands, millions, tens of millions, or even billions of dollars?

If they've got that much money they can still afford to live very comfortably to say the least, whereas Joe n' Jane Sixpack will begin to learn the true meaning of the word poverty.

IOW: its not the sheer amount that the rich lose vs. the non-rich, its the effect it has on their lives that matters. If you think losing millions but still having millions (or "just" hundreds of thousands) more lying around is pain or suffering or "hurt" then I shudder to think what going hungry or having to ride the bus to work at a crappy job for $14/hr would do to you.

tatupu70 says

Housing prices will rise during inflation–that is pretty much the definition.

Not if people can't afford the prices they won't, and the definition is monetary but can occur all throughout the economy at large in various and strange ways. They'll have to come down eventually, or wages will have to go up to meet the new prices, otherwise the homes don't sell and just sit there and eventually rot away.

tatupu70 saysPrices would rise.

This would certainly happen, particularly for any foreign goods or commodities since those prices will be dictated to us by external market forces.

tatupu70 says

And wages will rise as well.

The Fed has already stated multiple times that they're going to do everything they can to prevent wage inflation since they believe that is one of the main causes if not _the_ cause of inflation. Mean while wages have been dropping or stagnant for quite a while now in the US, and this has happened while the dollar has lost quite a bit of its value over the last few years.

I've already posted the charts a few posts up...

tatupu70 says

Neither of these things is happening now, of course, because we’re not in a period of high inflation right now. Just the opposite actually–very close to zero inflation. Some even have called it deflation.

Even the Fed's own numbers show CPI staying firmly in the positive range throughout all this deflation. All we had was a drop in the rate of inflation around late 2008 or early 2009, its gone up since then and is likely understated with the QE they've been doing.

Wages will raise, depending on what position a person is in. Minimum wage jobs might not raise by much. But many others will. Eventually others will catch up. Blue collar jobs are still in for a rough time, because there are so many blue collar workers in the world right now. It will take more time to absorb all of them. Eventually they'll start seeing wage increases. Probably in 10-15 more years. Too long for many of todays workers to benefit, but they will go up for the next generation.

aristocracy has normally owned land. Trying to move the kind of money you're talking about doesn't work. People can't up and sell off trillions in assets and expect to find "new" buyers for them, while they're running those assets off to another country. Not to mention they then need to find something in that new country to buy.

pkennedy says

Eventually they’ll start seeing wage increases. Probably in 10-15 more years.

If you seriously believe that and yet think that there is little to no chance of any sort of economic crisis then I don't know what to say. If that comes to pass then the Mexico-ification of the US that I fear will almost certainly occur.

pkennedy says

People can’t up and sell off trillions in assets and expect to find “new” buyers for them, while they’re running those assets off to another country. Not to mention they then need to find something in that new country to buy.

Sure they can, they just have the "friendly" government buy up all the assets at inflated or face value and then have their money managers move it off shore or into other assets that will suffer less or not at all when things fall a part.

10-15 years is a lot to ask for. How much have we changed over the past 10 years alone. Sluggish economy, a workforce of 1.1M down to mid 700K and lots of toxic borrowing hanging out like cancer.

Vicente says

Wages rising is not a given. See “stagflation

Yes, but wages rise in the VAST majority of cases of inflation. Stagflation is a very rare case...

tts--

Are you arguing that the dollar will devalue so much that it will cause foreign goods to rise in price and cause inflation? Fair enough, that's possible--but realize that US goods will then become signifcantly cheaper to export and jobs will suddenly come back to the States. Causing unemployment to decrease and wages to rise...

@tts

There a huge number of people in this world willing to work blue collar jobs, who are qualified for most of them. Often the training for those jobs isn't significant, and the cost benefits are massive to employers who take it upon themselves to train people from the ground up and can pay far less. China, India, Russia, Eastern European countries. Germany was hit hard by this when the berlin wall came down. A massive pool of blue collar workers all of a sudden willing to work for a fracation of what the west germans were working for. We're feeling that now from other countries that are slowly exiting communism. It will take quite a bit longer for many of those people to become employed and to start pushing those jobs wages up again.

You're also giving way too much credit to "evil" practices. Foreign governments aren't going to buy up their "friends" assets and take a fall for them. That would require governments buying up USD backed assets to perform this act of friendship.

1) There aren't many countries who could even think of doing that.
2) There are some 160 odd countries in the world. Assuming they *ALL* help their friends, how many friends do you think each individual country has? How many people can call up these governments and say "buy my stuff before I lose money, friend!!" 5? maybe 10? 10x160 = 1600 people max.
3) This requires having a top level employee in these countries, unless they're the president, they're going to be fired for doing something so stupid the first time they do this. So this becomes a bridge burning business. How well would you need to know someone before you'd burn your entire career helping them out?
4) money is NOT power. Losing money means nothing if you have power. You would never burn a bridge to keep money and lose power. You wouldn't even risk it. If you had a friend who had so much power that they could just redirect large sums of money for you, you aren't going to waste their power on something so stupid as saving some money for you.
5) These falls happen rapidly. There are *MANY* computer programs out there designed to trigger buy or sell orders if anything fishy happens.

Look at Warren Buffet again. He's been one of the richest men in the world for a very long time. He has the best grasp of financials that this world probably has. He's proven over his entire career that he knows what he's doing, and that it's not just pure blind luck. He outperforms the major indexes by large to very large amounts every year. Others might hit a home run for 4 or 5 years, but after that, they strike out, and in this world, a strike out means you're gone. He owned coke when it was going for about $90 per share. He valued the stock at $50, with hype keeping it at $90. It was stupid for him to keep the stock, but he did. Why? Because he had so much of it, that there weren't enough buyers at it for $90. He calculated out that it would drop below $50 before he could sell everything because the knee jerk reaction of investors would pop the bubble and it would fall. He wanted to keep it because even at $50 he knew it was a good deal. He couldn't sell to lock in a profit because it would shatter the price of the stock and bring it down to $50 or less. So he just held it and it slowly came back down on it's own. If someone like warren buffet can't get out of a stock when he knows months in advance that it's way over priced, then there isn't anyone who can escape using your "tactics".

A couple people might get some advance warning tips, but even then, when they try and execute on them, the computer programs instantly see them and pounce. Their pouncing causes others to react and before the person who started it even gets a chance to pull out, he's taken his beating.

tatupu70 says

tts–
but realize that US goods will then become signifcantly cheaper to export and jobs will suddenly come back to the States. Causing unemployment to decrease and wages to rise…

If we get the sort of large and rapid inflation that I think is possible than the future you describe is well over a decade away at best, mean while the nation ends up turning into a 3rd world country. Some parts of it already aren't too far away from that you know, but generally they're in areas that most don't think about like the Ozarks or the fly over states.

pkennedy says

@tts
There a huge number of people in this world willing to work blue collar jobs, who are qualified for most of them.

This isn't in question, indeed I would consider it a big problem. Many other countries can what only we used to now and for less either for their own local economies (so they don't import goods made here) or for exporting goods to other economies (which makes them our competitors). We have to find something to do here that almost no one else can do as well and we have to be able to sell it to other countries. There are lots of really neat things in labs right now, but then that has been true for decades. Some of it pans out, most of it seems to go nowhere.

pkennedy says

We’re feeling that now from other countries that are slowly exiting communism. It will take quite a bit longer for many of those people to become employed and to start pushing those jobs wages up again.

I think this statement would've been true back in the 90's, but no longer. There are almost no truly communist countries left and there hasn't been for a while now, most of the ones that were communist (like China) are now best described as a sort of weird mish mash of communism, capitalism, and totalitarianism.

I think jobs and wages (or benefits) will continue to decline here for a long time, due in part to our governments' policies to fight inflation but also because of the make up of our labor force (heavily concentrated on service and construction jobs, 2 categories that will get absolutely hammered in a prolonged recession, much less an inflationary depression like I imagine will occur), new developments in automation (not so much in robotics, but in doing symbols processing, things like clerical work which once required a human to do can now be mostly automated by machines scanning and processing paperwork and data), even more outsourcing (a problem before the bust, now companies are accelerating the outsourcing to lower costs in any way possible), and finally because of labor costs in this country vs. labor costs in developing nations.

pkennedy says

You’re also giving way too much credit to “evil” practices. Foreign governments aren’t going to buy up their “friends” assets and take a fall for them.

Our government seems to be doing a pretty good job of buying up all the bad assets the banks and Wall St. generated during the boom while lending them even more money and paying them interest to hold it besides. That is why they've been able to rake in the huge bonuses while paying back the TARP money, that is all our money they're playing with. Also none of the people involved in our gov. are going to take the fall for any of this. Look at what has happened to Greenspan or Paulson, nothing at all.

pkennedy says

Assuming they *ALL* help their friends, how many friends do you think each individual country has?

Not all countries are required to be corrupt nor does the entirety of the country in question need to be corrupted, only a few important parts of it. What is that old saying again? "Give me control of a nation's currency and I care not who makes the laws." Or something like that anyways.

pkennedy says

How well would you need to know someone before you’d burn your entire career helping them out?

If the money has already changed hands than they won't really care about losing their career will they regardless of wether or not they know each other.

pkennedy says

If you had a friend who had so much power that they could just redirect large sums of money for you, you aren’t going to waste their power on something so stupid as saving some money for you.

Sure you would. If they have enough money (really the same thing these days) to influence governments heavily than all sorts of crazy things become possible. Look at the sort of stuff that has historically happened in the poorer and more corrupt countries. The governments there are usually in bed with the criminals and quite literally get away with murder or worse all the time with just heaps of money alone.

pkennedy says

These falls happen rapidly. There are *MANY* computer programs out there designed to trigger buy or sell orders if anything fishy happens.

Yes, most of these systems are run by the very same guys who help hide or move wealth around for the rich. There will be no biting of the hand that feeds.

pkennedy says

If someone like warren buffet can’t get out of a stock when he knows months in advance that it’s way over priced, then there isn’t anyone who can escape using your “tactics”.

These people don't have to be right all the time, just most of the time, to get most or all of their wealth out of a country or currency. Again, even if you assume they lose half of everything they've got they're still head and shoulders above most anyone but other rich folks who are a teeny tiny portion of the world's population.

tts says

If we get the sort of large and rapid inflation that I think is possible than the future you describe is well over a decade away at best, mean while the nation ends up turning into a 3rd world country. Some parts of it already aren’t too far away from that you know, but generally they’re in areas that most don’t think about like the Ozarks or the fly over states.

The Ozarks? How about East LA. Or Oakland.

It's not going to happen, but I think it wouldn't take nearly that long if it did. The world moves pretty fast these days...

tatupu70 says

It’s not going to happen, but I think it wouldn’t take nearly that long if it did. The world moves pretty fast these days…

It would take a long time because the gov. would do everything they could to slow it down in order to prevent really crazy stuff like mass rioting or starvation from occurring, but everything has its price.

It took germany a long time to incorporate all of their blue collar workers, and they were living next door to them.

China/India and other communist countries might have given up all but the communist name, but they are still integrating all those people into their society, which in turn we need to compete with. Even china slows down the number allowed to join the blue collar ranks. We still are incorporating all of those workers, and will be for at least another decade.

There is nothing we can do "here" that others can't do. We don't have some super human gene that others don't have. It's a global world, a global economy. When those countries push up their standards, we'll be pushed up as well. The US has had a head start on many countries, and thus really just considers itself better. In actuality, it's most likely many of this centuries policies and wars that helped it. Communism really hurt many countries economically. World war 1&2 decimated Europe. They had to recover completely before they could start building new and improving technologies. The US on the other hand, didn't get blown up. Was selling en mass to Europe while Europe rebuilt. The US had a massive lead onn the rest of the world, but that lead is closing, not because others are doing better than us, but because they're learning from us how to do it. It's natural. We built up processes that sped us up 10% a year lets say. We got so far ahead of every one else that we were just cruising. Now that they are starting the build up process, they're looking at the US and saying "Ah! that is a good corporate idea.." and jumping 30-50% a year, they might still be 500% slower than us, but instead of requiring 50 years to get to where we are today, they will require only 10-15. Eventually they will only be shortly behind the US. At which point they will have to create their own ideas to push productivity, or live off our ideas. At that point we'll all be on nearly equal footings.

Power is far better than Wealth. I would far rather be as popular as Paris Hilton with $0, then be no one, with 5M in the bank.
Not only could I earn way more than a person with 5M could ever earn, I would be able to get into places and talk to people I could never do with just pure money. People don't trade power for money. If you think some dimwit in another country is going to buy up our rich peoples assets to save those rich peoples asses, so they can get a kickback, and lose their jobs in the process, you're insane. Someone who could "save" a rich person, is either going to use it on their direct families, OR keep the power. They aren't going to risk it for a small kickback from a rich person. If a person sits at the top of a country, they aren't going to risk their country to save some rich persons bank account. If they were that great of friends, they would be living in THAT country, not the US, and they wouldn't have a need for money.

Your ideas that people could hide this kind of activity are absurd. Your talking about a conspiracy that spans thousands upon thousands of people in the US, having contacts en mass with others who would willingly sacrifice their wealth or their position of power to save these rich idiots. If the president can't hide a simple blow job, there's no way thousands can conspire in your described methods.

pkennedy says

Even china slows down the number allowed to join the blue collar ranks. We still are incorporating all of those workers, and will be for at least another decade.

They're slowing down some changes in their economy/society because they can't count on the growth being there from external sources. So they can't expand or modify their economy too much more and they can't shrink it without having the people beat their dear leaders to death in the street.

pkennedy says

When those countries push up their standards, we’ll be pushed up as well.

Not necessarily. When the US was rocketing ahead during the post WWII era and all the way into the 70's, 80's, and 90's South America, Asia, and Africa were still mired in grinding poverty. Much of those areas are still that way today. Just because one part of the world improves doesn't mean that wealth or tech will get spread to the rest of it. If anything countries tend to try and horde it by keeping as much wealth as possible in their borders.

pkennedy says

Now that they are starting the build up process, they’re looking at the US and saying “Ah! that is a good corporate idea..” and jumping 30-50% a year, they might still be 500% slower than us, but instead of requiring 50 years to get to where we are today, they will require only 10-15.

Its the other way around. Very little is done here that isn't done elsewhere better, faster, cheaper. They've been ahead of us at adapting new ideas and implementing them for at least the last 8 years or so, maybe longer. The main problem is our government and banking system is dysfunctional and our country has large political divides that will greatly slow if not stop any sort of progressive policies. We're basically shooting ourselves in the foot over and over again and throwing our money at the same time. You can't do that sort of thing for long with serious consequences you know, and you sure can't improve the economy or country like that.

pkennedy says

At which point they will have to create their own ideas to push productivity, or live off our ideas.

They're already doing this. Quite a bit of medical and drug R&D is done over seas you know, most of the new battery tech is being made in China and S. Korea, as are many of the newer plastics and such.

pkennedy says

Power is far better than Wealth. I would far rather be as popular as Paris Hilton with $0, then be no one, with 5M in the bank.

They're interchangable, and with enough money you can buy all the popularity you want, Paris Hilton is the perfect example of that. There is nothing special about her at all other than the rich family she came from.

pkennedy says

People don’t trade power for money.

Just what do you think bribes are? That is a power trade for money. What do you think a paid assasination is? That is definitely a power trade for money. Same thing goes for stock manipulation or lobbying or offering congress men/women positions on the very companies they were regulating when they were office, that is all due to money. Power is money/money is power and always has been throughout human history.

pkennedy says

If you think some dimwit in another country is going to buy up our rich peoples assets to save those rich peoples asses, so they can get a kickback, and lose their jobs in the process, you’re insane.

You do realize exactly that has already happened right? During the crash so many foreigners bought "AAA" debt and invested in the banks which lied about how well they were doing. The foreigners lost their shirts, even worse than the Japanese did in the 80's. The thing is they've run out of foreign suckers, they've all been burned, so now they're selling the toxic debt to our government and municipalities. Who cares if they lose their jobs if they've become rich in the process anyways? They're rich, they can go buy a mansion in some foreign country and live it up however they want or go off and start a venture elsewhere.

pkennedy says

They aren’t going to risk it for a small kickback from a rich person.K/p>

Small? These people will get bribed for millions or even tens of millions. Lots of people would do most anything for that sort of money.

pkennedy says

Your ideas that people could hide this kind of activity are absurd. Your talking about a conspiracy that spans thousands upon thousands of people in the US, having contacts en mass with others who would willingly sacrifice their wealth or their position of power to save these rich idiots. If the president can’t hide a simple blow job, there’s no way thousands can conspire in your described methods.

The banking system is already pretty anonymous, and there is no conspiracy required for any of this. No NWO or anything like that is being suggested by me. Its just business as usual, billions get moved around the world every hour if not minute, what I'm talking about is hardly anything special. Bear in mind they need only keep the info. from public eyes before things fall a part. After that happens they don't care. Look what happened in Argentina, all the wealthy moved their cash out of the country before it blew up and then brought it back in and bought up most everything for little at all. No one had a clue what had happened until months later, and of course people were angry, but nothing could be done since these people were already out of the country and had too much influence in the gov. for any action to be taken against them. It was all over but for the crying.

As a northern virginian, all the opinions above up to now seem like a thing of other world to me.

Thanks to the last year's brutal snow storm that devistated the area. there're no homes in the market. Now I am seeing new listings are popping up everywhere and the asking prices are... well... that made me chuckle.

For example... At the end of 2009, the owner handed this propety to mortage compay on 289K. The company sold it to this guy on 350K at Jan 2010. Then the guy is selling it at 470K. Now it's under contract. 120K profit in two month is fantastic if it goes thru. 470K is about the peak price for the home in 2007.

Another property has been sitting there for more than 400 days. I have no idea why I never saw the property during that days in any website though, it recently popped up relisted at 40K increased price.

Another and another... chuckle after chuckle.

It looks like they're trying to get the full advantage of spring market before obama credit expires.

The same happening in your area?

seaside says

It looks like they’re trying to get the full advantage of spring market before obama credit expires.
The same happening in your area?

Yes, very much so. Things on my favorite list on Redfin are going pending and selling like mad, both in the Sac foothills and here in the East Bay (west and central Contra Costa). It's picked up A LOT in the last 2-3 weeks.

This "tax credit" thing is a load of BS.

People who were going to buy, by and large, buy anyway. The number who bought only BECAUSE there was a tax credit, you've going to have a hard time making the case the measly amount that it represents is what pushed them over the brink.

Sales are DOWN
Mortgage rates starting to creep UP
BofA announcing principal forgiveness just to keep underwater hamsters on the treadmill
Fed will soon stop buying MBS, there's a bigger factor than your tax credit

Vicente says

This “tax credit” thing is a load of BS.
People who were going to buy, by and large, buy anyway. The number who bought only BECAUSE there was a tax credit, you’ve going to have a hard time making the case the measly amount that it represents is what pushed them over the brink.

Well, what it is doing is pulling sales forward. If you were planning to buy anyway, you might decide to buy sooner because of the tax credit. And let's also not forget that in most of the country, $8k could represent 5% of the purchase price. That's a pretty decent chunk. But I agree that it's not going to change anyone's mind about buying.

I've been making offers, all cash mind you, on foreclosures in San Francisco~~~and I've been outbid every time. Anecdotal, I know, but it's frustrating as I'd like to be able to buy an investment property there and keep it as a place for future retirement. I'd like to think that prices will go lower, but there are lots of cash buyers out there who have been waiting for prices to fall. I don't think I need to rush into buying, but part of me is beginning to fear that the best time to have bought might have been early last year. I realize that there are bargains to be had in the outlying areas, but I want to be in the heart of the city so that I can maximize my rent potential, should I decide to rent it out.

WillyWanker says

I want to be in the heart of the city so that I can maximize my rent potential, should I decide to rent it out.

To maximize your rent potential, you want the highest percent return on your investment, not the maximum rent! That generally means avoiding the heart of the city, where rents are high, but percent returns are among the lowest in the whole Bay Area.

But there are a few good reasons to buy in central SF if you already live there:

It's easier to manage a rental near your than farther away.
You may want to live in it, where you would not actually want to live in Vallejo.

She has been right about a lot of stuff!

My first post after reading PAtrick.net for nearly 5 years...

Has anyone read this article?

http://www.fool.com/investing/general/2010/03/30/housing-24-hours-from-the-next-leg-down.aspx

When the Fed stops buying MBS (in 24hours) this will have an effect on interest rates and housing prices.
The questions are how soon will housing prices be affected?... and to what degree?...

cheers.

AiJ, thanks for posting that. Good article. My feeling is that moderate interest rate increases without an accompanying wage increase will result in a decrease in house prices. However, if interest rates rise dramatically, triggering fears of runaway inflation, house prices will likely rise as people flee to hard assets (I will be one of those people).

I don't think we'll see prices drop until this Fall (unless the stock market tanks sooner) as the Spring/Summer buying season will cause sellers that can hold out for bubble prices. Also as long as the market holds or rises people feel "rich" and won't want to discount.

Stagflation will be the endgame.

Anything that unfolds this year will likely be a continuation or variation on the various rope-a-dope schemes we've seen this year and last. Get people in houses and keep the money supply moving. Bernanke has already stated that the Fed will simply start buying up MBSs again if housing sales begin to seriously contract (correct).

Austinhousingbubble says

Stagflation will be the endgame.
Anything that unfolds this year will likely be a continuation or variation on the various rope-a-dope schemes we’ve seen this year and last. Get people in houses and keep the money supply moving. Bernanke has already stated that the Fed will simply start buying up MBSs again if housing sales begin to seriously contract (correct).

Agree, I think this game would never end. Fed will just double down and by another $3T of MBS, because nobody else would. If they let it go, interest rate would definitely go up by 1.5-2%, which would cause the housing sale to go down rapidly(already its down for the last two months). I think they wouldnt let anything happen until this election.