patrick.net

bgamall4 says

We need a little deflation to make up for all the inflation we have suffered through with the ponzi housing bubble.

Be careful what you wish for.

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

Well, the inflation long term trends were not good because they pushed cost of living up and stole from cash savings slowly.

But since we've had so much inflation and for so long - deflation will cause a lot of people economical problems.

The dollar should have stayed stable instead of inflating all those years like the Federal Reserve manipulated... And now if they deflate - asset prices will collapse and defaults and bankruptcies will skyrocket.

So yeah be careful with what your saying about deflation being good.

But the damage has already been done by inflation trends long-term. A ponzi scheme eventually collapses.

90% -95% from the pick? Yes it can happen but only is some areas where oversupply of rental houses or high unemployment will cause drop in rental prices. Yes, rent can go down too.
Some people already understood the fact that bank lent them fake money and rejected to give them back Real Money. Instead they give to bank fake asset purchased by fake money back. Pronto!
Deflation is what we actually have. During deflation is harder and harder to pay back loans. Now when cost of transportation and food is going up, but salary stay the same or often got reduced – less money retain to pay debt. With all that government breaks high inflation will definitely happen but not so fast. Beside after high inflation your current equity (if any) in house be worth much less than today’s dollar.

Inflation has two components. Prices are going up so the salary. Effectively buying power is the same.
In deflation salary goes down and prices for goods and services follow it. However we have to remember that will not apply to Everything. Some prices are dictated by local markets (e.g. rent) and some by global markets (commodities).
In fact in many areas rent is not going up at all.
Obviously, in other were job is available and many people lost houses, vacancy going be lower and rent higher. Today gas prices are dictated mostly by Chinese economy.

I would say we generally have inflation in food, energy, medical care and tuition. We have deflation largely with electronics due to the high competition. We also have deflation with some mediums because demand is lower (who buys cd's today?) Houses might be argued to have deflation but if you have to finance an object then it might not really be that much deflated. I am a tad surprised that cars have not gone down in price. Technically cash for clunkers (a bad program) caused used prices to go up.

Naturally inflation can be imported (ask anyone that filled a gas tank in the early 70s) but there are signs that people are starting to share items which can reduce aggregate demand eventually. When people lack money they are more likely to trade items with others or services in lieu of payment (barter economy). Websites make this a bit easier. Although I won't claim this is going to be a earth quaking situation I wouldn't be surprised if retailers start having lower sales in markets where trading is more common.
http://www.time.com/time/magazine/article/0,9171,2032109,00.html

Very touchy in a way for both sides of the aile. I been looking to buy a home. What has astonished me is the fact that housing effects every citizen in country at one point in time. However, no body is talikng about data much less clear information for buyers. Any tom/harry can write an article and try to persude or dissude you from buying house without the gurrantee of fact that information presented to you is factual or far fetched.
I suppose we do have middle class with income in range from 80,000 to 150,000 per family per year and we comprise about 80-90 % of population group. How in the world you expect this segment to buy a home in current market.
May be landlords lobby is spending all on the special interest people to prevent home owner ship in country. After all, who stand to benefit from un affordable housing.
I have heard NAR stating for every house many jobs are created and maintained and agreement is based on NAR data. Agreed,that include banker, real estate and lawyer.
Thier concotion is bitter sweet for taster depending upon.
Real fact is that unless Fedrale gives everone a million dollar interest free to buy homes, expect housing to correct to 1999 levels. Donot buy home to buy an ATM in house but to raise family.
I have seen people lining up with cash buying homes which make me wonder how is that happening? IRS seem dysfunctional at the best to ask where the money came from.
This should stop bullying and BS at the auctions.
In any case, lets write to our politicians who are busy with facts and fictions of thier melonodromic life to help keep american dream alive

You say inflation,
I say deflation.

I say creation,
You say speciation.

Inflation, deflation; creation, speciation
let's call the whole thing off.
****************
It really doesn't matter what you call it, those are just words. I think inflation is an expansion of the money supply (these days, "money + credit"). Deflation is a contraction of the money supply (or, "money + credit"). Some economic theory that I don't understand adds "velocity" to the description. Whatever.

Probably everyone on here will agree that we have rising prices on some stuff, falling wages for some folks (many of them, falling to zero) and so less money to spend. One can call these things whatever s/he wants to call them and boast about how s/he can smarty-pants their way into profiting from the misery with their trades in the margins of it, but I call them a Lower Standard of Living.

Sybrib says

Some economic theory that I don't understand adds "velocity" to the description. Whatever.

yeah, I don't understand velocity either, and you can't find a good definition online. My old World Book encyclopedia had an interesting diagram that showed a simplified economy of a ring of 10 or so producers all paying money to each other in a cycle in a local economy.

But actually quantifying the velocity of money is the interesting thing.

Like what happens to the $900B/yr the DOD is spending? Theoretically that should trickle out in $30,000 quanta to 30 million different people, I guess.

And of course, money is not normally destructible, so this velocity never really ends.

Sybrib says

No reason why we can't have deflation and rising prices.

yup. Some sectors are have elastic demand and some don't. Housing, energy, and medical tends to be inelastic and thus prices are more buoyant in deflationary times.

Landlords also enjoy location monopolies and via informal collusion can attempt to hold the line on prices.

It is all a battle for the paycheck. If paychecks don't get bigger, there's going to be a problem, but it's difficult for renters to go on strike. Gotta live somewhere.

And that is why, rich fatcat landlords, not only immune, but probably thrive and profit from deflation.

Rising prices are rising prices.

Inflation is the inflation of the money supply and credit supply.

Rising prices can be a symptom of rising (money + credit) supply, but need not be.

It is really just a semantics thing anyway, though some Rich Folks, including those who exploit the working classes, are deliberately and disingenuously trying to confuse others by calling Rising Prices "inflation".

Whatever.

Doesn't matter, rich folks are thriving and profiting while the rest of us are watching our living standards decline from a Deflating (money + credit) supply while being confronted by Inflating Prices for things that have as Troy wrote a rather inelastic demand.

Sybrib says

Rising prices are rising prices.
Inflation is the inflation of the money supply and credit supply

Really it's not. Inflation is defined as rising prices. Period.

Rising money supply and/or credit supply can cause prices to rise (inflation) but it is not the definition.

Missed one:

tatupu70 says

Rising money supply and/or credit supply can cause prices to rise (inflation) but it is not the definition.

Like I said, it is symantical. Whatever. But pop media got successful getting you and others to take your eyes off the mark from root causes to tangible effects.

Troy says

Missed one:

Now, why would someone assume that recession was over in 2009?

Inflation or deflation? Let's not get sidetracked,come to the central point, will the house prices increase or decrease?

^ wat?

The CMDEBT curve was mainlined right into middle America's checking accounts via the home ATM and all the real estate and construction bubble employment.

money supply has all the relevance as the price of tea in China right now since the laboring class doesn't have any money any more.

but I doubt in 2008 anyone would have predicted how little effect it would have.

what is "it" here? From 2008, the middle class lost its share of that $2T/yr credit inflow. That was the bubble machine that powered us out of the tech recession. The bubble machine still being off now is why we're still in the deep depths of recession and things are getting worse:

Unemployment is still as bad as it has ever been, since FDR.

Troy says

And of course, money is not normally destructible, so this velocity never really ends.

But in our fiat system, DEBT is destructible when it's paid back or defaulted upon. So a lot of people/companies paying back debt or defaulting results in the destruction of a whole lot of money which is deflationary.

With regards to asia we also have to consider what the dowry system is doing. In western countries all this means today is that the family of the wife pays for the wedding. In asia it can be to extremes.
http://www.the-spearhead.com/2011/05/04/the-economics-of-male-preference/
http://en.wikipedia.org/wiki/Missing_women_of_Asia
There are higher rates of abortion of girls, higher rates of infanticide and higher rates of suicide of women.
The preferences for men in the long term leads to a country having more men than women. Any extra men in aggregate will probably be single and the population will be reduced since logically they cannot have children. Add in the one child policy of china (largely ignored in the south and bribes can get past it but still) and the problem compounds on itself.

If we were to go back in time and factor out the population rise in Asia that could probably nullify how cheap the labor is. Ironically the USA keeps growing.

There's a far off prediction that by the end of the century we'll have more people than china.
http://www.theglobeandmail.com/news/opinions/more-americans-than-chinese-a-lot-can-happen-in-100-years/article1703279/

mdovell says

consider what the dowry system is doing

Notice a pattern, student visa to get your PhD, H-1 visa, then, immediately after obtaining the green card, make a trip "back home", come back with a bride and then immediately buying a Fortress Residence?

Don't know if it is true or not, but a long time ago I read a letter to the editor of a local news publication from someone who claimed to be a software engineer that said an engineering job + green card in the Bay Area was worth about 100K of dowry.

Also real estate price increases used to be signification helped by psychology, that is the belief that price increase would continue. This is over.

Meanwhile many boomers are going to want to downsize, effectively monetizing some of their home equity for retirement needs.

These are some of the reasons that many people are predicting that housing drops bit further. I am not in agreement with those who think prices are dropping a lot more.

marcus says

Sure, we don't have outright deflation in all sectors of the economy, but we have massive deleveraging and strong deflationary forces at work.

we've been treading water for 2+ years now.

Having lived in Japan in the 1990s, I've seen this movie before.

I didn't know it at the time, but I was FOB Tokyo at the exact moment that corresponded to our March 2009 bottom (August 1992).

We are not Japan (their currency has strengthened 60% since 1992, ours needs to weaken, we get massive investment inflows, Japan, not so much) but the overall debt-collapse dynamics are the same.

The dems losing the House really really screwed things up. What passes as the left in this country is fighting to stop deflationary cutbacks and not actual progressive and constructive economic interventions.

I recently read the military is no longer doing stop-loss and big enlistment bonuses. They're in spin-down mode too. Tiny 1% cuts to the military is $6B or more, which still is a lot of money, believe it or not, 100,000 jobs or so in the direct analysis, 250,000 or more due to velocity of money.

Troy says

the military is no longer doing stop-loss and big enlistment bonuses. They're in spin-down mode too.

Most of the Cold War spending was for compensation in one form or another, even pay for involuntarily conscripted conscripts, or salaries for aerospace engineers. It was a massive redistribution program, because the rich feared the alternative of Soviet type communism world domination. Confronted with that specter, the rich needed us during that time.

"Meanwhile many boomers are going to want to downsize, effectively monetizing some of their home equity for retirement needs."

That's very true. How can EVERYONE downsize. Let's not also forget that gradually they'll sell off stocks, bonds, 401k's, IRA's etc to retire.

Here is a good article..a journal infact.
http://www.scag.ca.gov/housing/pdfs/trends/AgingBabyBoomers_GHB.pdf
it also shows the crossing time that will have more people selling than buying in various states. Once it hits 2016 we'll get another chunk of this. Right now MA is getting hit. By the time we hit 2030 (obviously a bit of a ways off) we can kiss a fair amount of this goodbye. This is one of the only journals that admits it expects the housing burst to continue for decades.

If people were hit in the stock market bad they might assume they can bank retirement off of their house and frankly that isn't the case.

MCMSinger says

It's amusing though that people fear monger inflation when inflation is most likely going to help them. Why? Because the majority of Americans have debt - when the scarcity of money rises by 10 times - it will take 10 times the effort to pay off that same debt. Inflation will hurt savers though but majority of Americans hardly have any savings or no savings at all.

Inflation does not automatically, and even necessarily, apply to wages. There is a huge flaw in your logic.

housingcasino4865 says

Inflation does not automatically, and even necessarily, apply to wages.

Eventually it does. You can't have living costs skyrocket and then expect to pay workers the same wage forever.

"Eventually it does. You can't have living costs skyrocket and then expect to pay workers the same wage forever."

Yes you can. The 1970's proved that inflation can be imported (oil going up with the embargo). If consumers get shut out then so be it

I don't think we've seen actual wage inflation since the 70's since we have largely seen a decline in unions and strikes. Post patco government unions hardly go on strike.

Now you can state that people naturally want more when prices go up but that does not automatically mean they'll get it.

My last job was at a large box store and someone..somehow leaked out the pay scales. It was NOT based on cost of living but rather competition. Scaled 1 to 5 (five being highest). The only areas that were 5's were LA, SF, Brooklyn and New Orleans. 1's are where there is hardly anything. Most were 2's and 3's. The wages in Boston are the same as Orlando even though Boston cost much more. Since most employees don't know the ranges they have no clue they were getting ripped off.

Besides as companies raise prices for higher energy costs some don't and rather reduce service and product size. The most famous example of this is the size of coffee. It used to be a pound..then gradually an ounce here.an ounce there. Heck I saw flavored starbucks that was 11oz!

Or companies will simply lay people off rather than pay higher wages. Businesses have to see a ROI before they start to increase wages simply due to inflation. More importantly since inflation can occur in countless products it makes it nearly impossible for the employer to know them all. Let's say a single man is a boss of a few people who have families with infants. Say some incident at a P&G plant causes the prices of diapers to skyrocket. The boss has no clue about this because he doesn't have kids. Here's another example..tobacco. Due to government taxation tobacco prices have risen dramatically in the past 20 years. No employer in their right mind is going to give someone a raise so they can smoke..or drink for that matter.

MCMSinger says

It's amusing though that people fear monger inflation when inflation is most likely going to help them. Why? Because the majority of Americans have debt - when the scarcity of money rises by 10 times - it will take 10 times the effort to pay off that same debt. Inflation will hurt savers though but majority of Americans hardly have any savings or no savings at all.

Inflation does not automatically, and even necessarily, apply to wages. There is a huge flaw in your assumption.

Sybrib says

Notice a pattern, student visa to get your PhD, H-1 visa, then, immediately after obtaining the green card, make a trip "back home", come back with a bride and then immediately buying a Fortress Residence?

So you are saying that most Indians take 6 years to get their PhD and then another 6-7 to get their green card, assuming they get an employer to both apply for their H1, renew it in 3 years, and then do a 1-year extension while an adjustment is pending because the employer later decided to sponsor them, and then finally decide to get an arranged marriage at the age of 35? That doesn't seem to fit with anything I've observed. Someone seems to be stereotyping a bit too much, methinks.

Sybrib says

Don't know if it is true or not, but a long time ago I read a letter to the editor of a local news publication from someone who claimed to be a software engineer that said an engineering job + green card in the Bay Area was worth about 100K of dowry.

Now you're trying to claim expertise on dowries? Which don't even really exist in cities any more? Come on. You didn't read this anywhere. How exactly are these people saving $100K in USD when wages are so low?

mdovell says

Yes you can. The 1970's proved that inflation can be imported (oil going up with the embargo). If consumers get shut out then so be it

I never disagreed that it's not possible to have inflation while at the same-time the wages stay the same.

I simply disagreed that costs will keep going up while wages stay the same forever.

Eventually the wages will need to be raised reasonably in proportion to inflation. And you are right - just because employees demand a certain wage doesn't mean they will get it even if they need it for costs of living.

But eventually employers lose the upper hand. Right now, employers have an upper hand.

“No one has a natural right to the trade of money [loan money], but he who has money to lend.”

-Thomas Jefferson

Bump thread...

Robber Baron Elite Scum says

Eventually it does. You can't have living costs skyrocket and then expect to pay workers the same wage forever.

Ofcourse you can. Read Barbara Ehrenreich's book 'Nickled and Dimed' to see how that happens. People at the bottom rung of American capitalism (those that work near minimum wage or are on fixed incomes) have no power to demand increases in wages that protect them from price inflation. There are more of them than there are jobs, so it's only by the grace of minimum wage laws that the China price isn't reached and since minimum wage rates are rarely scaled upwards (and never make up for the losses in purchasing power between the last hike and the next), standards of living drop. At the same time social safety nets are cut and low-skilled illegal immigration goes unchecked, so more people can compete for the few jobs available, reducing the power of the working poor and those on fixed incomes. Jesse Jackson Jr. tried to get a bill through recently that would have raised the minimum wage to $10 an hour (which for most with kids would still leave them below the poverty line) and more importantly, force it to rise with the CPI. It was soundly slapped down. The rich don't want to sure up the standard of living Americans have at the bottom, and unlike tax breaks for the rich which don't trickle down, decreases in living standards do, infact, trickle up.

futuresmc says

Ofcourse you can. Read Barbara Ehrenreich's book 'Nickled and Dimed' to see how that happens. People at the bottom rung of American capitalism (those that work near minimum wage or are on fixed incomes) have no power to demand increases in wages that protect them from price inflation.

I now agree that inflation can continue to skyrocket without increase of wages to make up for it.

+1

I can recall so many people saying how even a minimum wage job just 10 years back could have done much more for than it can today.

Nowadays a minimum wage job is honestly just slavery...

It will get you nowhere. There is no "moving up" or "climbing the corporate ladder" anymore. That is a big myth nowadays.

There is little if any incentive right now for people to work a job... (if you can find one anyway)

But there is every incentive for people to start robbing back what was taken from them from the rich.

@Â¥

I thought you had left Patrick.net

Good to see your comments again!

AIJ, ¥'s post is in fact from 2011 -- I just read through this entire discussion without noticing that most of it is from a year ago!

No guys. I'm still here; I never left. Just changed my name & icon.

Want to buy a house? Have 20% down!
Want to buy a house? Have 20% down!
Want to buy a house? Have 20% down!
Want to buy a house? Have 20% down!
Want to buy a house? Have 20% down!
Want to buy a house? Have 20% down!