patrick.net

Rates will end up in double-digits in the coming years.

nah. The Fed can pump enough money to keep rates low.

It is inevitable that the US gov't will default within a few years (or much sooner)

Nah. The Fed can print money to prevent that.

We will have more downgrade just like Greece

Nah. The Greece 10 year is ~15%. The TNX is 2.24.

The housing market is doomed to fail.

flail more like.

As AF says prepare for upcoming cannibal anarchy. Just kidding. I am not sure rates are going up anytime soon. If a republican is elected as a president it may change though. In any case home prices will keep tanking,even with rock bottom rates.

Troy - you're way off. Printing money will eventually lead to a currency crisis. The last time we had a currency crisis in the early 80's, rates hit 18%.

That's the solution. Keep printing....keep printing. It's a lose lose situation for housing.

I'd be happy with rates hitting 5% or higher. I'd start buying CD's again. Maybe get a savings account which earned meaningful interest again too.

I'll guarantee you the "Equity Mafia" who are determined that their house is worth at LEAST what it was priced at in 2005, will fight to the death the idea of cutting prices. The banks are totally in this game too, and are insofar as I can see, only grudgingly cutting prices even a small amount. They'd rather hang on and sell to a cash-only Richie Rich specuvestor, than sell to you citizen.

HousingBoom says

Printing money will eventually lead to a currency crisis.

Yeah but guys in Washington DC does not have any clue. They are just interested in preventing the bubble from deflating.

bubblesitter says

HousingBoom says

Printing money will eventually lead to a currency crisis.

Yeah but guys in Washington DC does not have any clue. They are just interested in preventing the bubble from deflating.

I agree. They are fighting deflation but every single gov't that tried this ended up with a currency crisis and/or a worthless currency. Gold's skyrocketing price is telling the story.

Vicente says

I'll guarantee you the "Equity Mafia" who are determined that their house is worth at LEAST what it was priced at in 2005, will fight to the death the idea of cutting prices. The banks are totally in this game too, and are insofar as I can see, only grudgingly cutting prices even a small amount. They'd rather hang on and sell to a cash-only Richie Rich specuvestor, than sell to you citizen.

“Eagles are dandified vultures” - Teddy Roosevelt

They can't stop home prices from falling.

cab says

Your term should be coined, "the Equity Mafia!" Isn't that the truth!

Haha, been in use around Davis California for a while.

Davis homeowners have repeatedly voted down various new developments in the last 6 years I've lived here. Every one of them, the "anti" groups all had a public face we are doing it for high-minded reasons. Public reasons that conspicuously leave out their REAL reason. Namely keeping the place "landlocked" so their own equity is not eroded. In private, it's a frequent topic.

HousingBoom says

Printing money will eventually lead to a currency crisis. The last time we had a currency crisis in the early 80's, rates hit 18%.

Nah. I'm no economist, but I'm pretty sure the inflationary period of 1975-1985 was just the baby boom hitting their peak borrowing and household formation years. All that credit created a lot of bank money and demand on limited goods.

Debt to GDP was just ~25% in 1979. Things were relatively squared away back then, even if we didn't really know it at the time.

The baby boom aged from 13-29 to 23-39 in that decade. Volcker could have let things inflate up & up, but decided to kill the wage-price spiral along with the economy with NO CREDIT FOR YOU interest rates.

There's tons of dollars out there now. It's all gotta go somewhere. The system doesn't need inflation per se, it needs wage inflation. But with our $600B/yr trade deficit and $1.2T+ budget deficit, and state budgets equally parlous, everything is hanging by a thread from deflationary cross-default collapse.

18% rates will come when Walmart is paying $20 an hour (and gas is $10).

It'll probably happen but I don't know how we're going to get there from here.

We're not Greece, and we're not really Japan for that matter either. Things are too complicated to understand. I don't think anyone can really understand how all this is going to evolve this decade.

I don't see a pretty picture forming, but I've been wrong before on that.

Troy says

I don't see a pretty picture forming

We have a lost decade in front of us. Without the return of all jobs including the high paying ones it is easy to predict that economy will be sour for a long time,no doubt about it.

@Troy,
100% exactly right.

"23 Things They Don't Tell You About Capitalism" by Ha-Joon Chang...a must read!

government already defaulted, life already costs more.

Troy says

Nah. I'm no economist, but I'm pretty sure the inflationary period of 1975-1985 was just the baby boom hitting their peak borrowing and household formation years. All that credit created a lot of bank money and demand on limited goods.

You left out energy prices more than tripling in 3 years and the effects on an economy that was very, very energy inefficient at the time.

FortWayne says

government already defaulted, life already costs more.

Quality Auto Repair Since 1979

Greece is on the verge of default. The US is not there yet.

HousingBoom says

Rates will end up in double-digits in the coming years

relatively speaking, euro is in deeper trouble at the moment that the dollar. So no, there's lesser likelihood for US treasury rate spike purely because dollar is safer and flight to safety will help the dollar.

HousingBoom says

I'm sure many people did not see the S&P downgrade coming.

lol yields went down after the downgrade. More people bought treasuries. economy is weak, there is not a single large liquid market such as the treasuries where you can park your cash safely. Relatively speaking, treasuries are still considered safe by the market.

HousingBoom says

It is inevitable that the US gov't will default within a few years (or much sooner).

you should check out the Alan Greenspan video on cnbc recently when he said there's 0% chance of a US default because....we can always print more money. lol. thats true and as long as the US dollar remains world reserve currency, US continues to have this luxury of printing, but no big domestic inflation.

HousingBoom says

The housing market is doomed to fail.

fed funds rate will be kept low until 2013 which means that money borrowing continues to remain cheap. demand is weak so housing will remain weak, surely house is NOT the way to protect/grow your wealth. But it won't collapse, because the Fed, banks don't like it and the financial industry controls the political process.

austrian_man,

You sound just like the anchormen on CNBC. I would prefer listening to guys like Peter Schiff who is predicting everything I wrote in my original post. You're listening to Alan Greenspan? LOL

http://www.youtube.com/watch?v=YvwqX6o69Iw&feature=channel_video_title

HousingBoom says

You sound just like the anchormen on CNBC. I would prefer listening to guys like Peter Schiff who is predicting everything I wrote in my original post. You're listening to Alan Greenspan? LOL

Well, if Alan Greenspan is telling the truth - why wouldn't you accept it? he is saying we'll print money to pay the deficits - which part of it is not true?

Peter Schiff is a good guy, but he has been wrong in some of his calls too. He said US will have hyper-inflation in 2010. Did we?

US is not going to have an imminent hyper-inflation for example and Schiff keeps ignoring the fact that credit is contracting at a faster rate than Fed is printing money.

http://globaleconomicanalysis.blogspot.com/2011/08/yes-virginia-us-back-in-deflation.html

http://theautomaticearth.blogspot.com/2010/12/december-15-2010-debunking-gonzalo-lira.html

Stoneleigh's (pen name for Nicole M Foss) call on Euro was spot on:

I see far more imminent problems ahead for the euro than for the US dollar. I expect the shift from optimism to pessimism, that will define the end of the stock market rally, to lead to a rapid resurgence of fear over sovereign debt default risk in Europe. This can only exacerbate the widening regional disparities, and I think it will widen them to breaking point, for the eurozone and perhaps later for the EU itself.

Make no mistake here. I am also with you on the fact that the Greatest Depression has arrived. But it is more deflationary in my opinion than inflationary, as your original post suggests.

There's no Great Depression. It's a lie!!! We all got food on the table and lots of us still got a job. People bung iPad, expensive cars all the time!!!

Clara says

People bung iPad, expensive cars all the time!!!

lol, you can't eat an Ipad.

Anyway, here are two graphs to prove that we are heading to, if not already in a depression. over 13 million Americans will live on about one third what the cheapest iPad costs in about a year.

Here's the graph of unemployment rate, true unemployment rate should include long-term discouraged workers as well.

Nomograph says

Wake me when the line at the Apple store becomes a soup line.

Its up to you to wake up and look at the data.

Nomograph says

HousingBoom says

The Greatest Depression has arrived!!!!!

If you have to try really hard to convince people that we are in a Great Depression, then we probably ARE NOT in a Great Depression.

Wake me when the line at the Apple store becomes a soup line.

Let other pens dwell on guilt and misery -- Jane Austen

lol soup line? have you heard of food stamps? there's your modern day soup line. take a look at the "soup line" chart. it's at record highs.

people who think like you are the reason I need to make these posts

austrian_man says

Well, if Alan Greenspan is telling the truth - why wouldn't you accept it? he is saying we'll print money to pay the deficits - which part of it is not true?

Peter Schiff is a good guy, but he has been wrong in some of his calls too. He said US will have hyper-inflation in 2010. Did we?

US is not going to have an imminent hyper-inflation for example and Schiff keeps ignoring the fact that credit is contracting at a faster rate than Fed is printing money.

I agree. We will most likely not going to see hyperinflation in the near future. I am actually betting on massive deflation in the short term. I said in my original post that we should see double-digit rates in the coming YEARS.

Alan Greenspan is nothing but a puppet. I don't believe a word that comes out of his mouth. Schiff did make a few incorrect (short-term) calls but he is usually right with his long term predictions.

That chart is dishonest, to call it an all time high, on percentage when the chart starts less than ten years ago.

Participants

According to the United States Department of Agriculture (based on a study of data gathered in Fiscal Year 2006), statistics for the food stamp program are as follows:[15]

49% of all participants are children (17 or younger), and 61% of them live in single-parent households.
52% of food stamp households include children.
9% of all participants are elderly (age 60 or over).
76% of all benefits go to households with children, 16% go to households with disabled persons, and 9% go to households with elderly persons.
33% of households with children were headed by a single parent, the overwhelming majority of whom were women.
The average household size is 2.3 persons.
The average gross monthly income per food stamp household is $673.
43% of participants are white; 33% are African-American, non-Hispanic; 19% are Hispanic; 2% are Asian, 2% are Native American, and 1% are of unknown race or ethnicity.[15]
From the above data 8% of the white population of the United States of America are participants, 39% of African-American non-Hispanics are participants, 15% of the Hispanic population are participants, 9% of the Asian population are participants and 31% of the Native American population are participants.

An annual report released by the USDA about the composition of households participating in the Food Stamp Program is identified as the Characteristics Report.

Aside from nutritional assistance, SNAP Employment and Training (E&T) funds can also be used to provide recipients with education and training and career pathways programs. SNAP outreach funds can also be integrated with screening tools for other public benefit programs.

bubblesitter says

As AF says prepare for upcoming cannibal anarchy. Just kidding. I am not sure rates are going up anytime soon. If a republican is elected as a president it may change though. In any case home prices will keep tanking,even with rock bottom rates.

Fed promised to keep rates low until mid 2013. So they are certainly not going up anytime soon.

HousingBoom says

I said in my original post that we should see double-digit rates in the coming YEARS.

Put a time-frame. For instance, I'll tell you this - rates are not going to double digits until 2013 given that Fed is keeping their funds rate low and also euro is in a shittier place than dollar right now.

Tell me the time frame, then planning towards that may be useful. A prospective buyer won't get good prices for houses at least until 2013, given that loose money continues to distort the market.

HousingBoom says

Alan Greenspan is nothing but a puppet. I don't believe a word that comes out of his mouth.

I agree he is a puppet. but I don't think he's a complete doofus. Come on, after all -- he wrote the paper "GOLD AND ECONOMIC FREEDOM". He understood the role of gold in today's monetary system and why out-of-control spending and monster derivatives market came to exist today.

austrian_man says

Put a time-frame. For instance, I'll tell you this - rates are not going to double digits until 2013 given that Fed is keeping their funds rate low and also euro is in a shittier place than dollar right now.

IMO, we should see double-digit rates within 3 years from today. The Fed's statement about keeping rates low until mid-2013 means absolutely nothing. All they do is make and break promises.

The minute the run on the dollar begins (who knows when), rates will start to skyrocket.

austrian_man says

I agree he is a puppet. but I don't think he's a complete doofus. Come on, after all -- he wrote the paper "GOLD AND ECONOMIC FREEDOM". He understood the role of gold in today's monetary system and why out-of-control spending and monster derivatives market came to exist today.

Don't get me wrong, I am sure Alan Greenspan is extremely intelligent. What use is it when he's told what to say. Ron Paul just asked Bernanke why the Fed holds gold and his answer was "tradition". lol Bernanke is probably very intelligent but that the was one of the dumbest answers I have ever heard. They are all puppets so anything they say is worthless in my opinion.

HousingBoom says

The minute the run on the dollar begins (who knows when), rates will start to skyrocket.

The minute rates skyrocket $50T in debt starts to get defaulted on.

Nomograph says

If you have to try really hard to convince people that we are in a Great Depression

Debt to the penny:

08/11/2008 5,403,503,090,045.93
08/11/2011 9,921,146,601,533.97

$4.5T of deficit spending in 3 years. ~$40,000 per household. Technically (just the basics) $40,000 should be enough to tide a household over for 3 years.

And that was just the money we borrowed.

If Hoover had dumped 10% of GDP into the economy 1929-1931, there wouldn't have been a GD I, either.

Troy says

HousingBoom says

The minute the run on the dollar begins (who knows when), rates will start to skyrocket.

The minute rates skyrocket $50T in debt starts to get defaulted on.

“Nessuna soluzione . . . nessun problema!„

Yes, that's when the real crisis starts. We'll have no choice but to raise rates and the interest on our debt will break the bank. Where will we get that money? The printing press of course. This will most likely snowball into a full blown currency crisis with skyrocketing interest rates. It's a lose lose situation. The housing market is doomed!!!

It will be interesting to see what happens. A currency crisis with the predominant currency in the world. That blazes new ground. It is ineresting to see other coutries indicate that the US is no longer the predominant currency. It might be true soon, but not right now. You can spend USD in many places and if it implodes - nobody can predict what will happen. My bet would be that China will not sit idly by and let our currency de-value. I do not see how they can. The part I have never understood is that even though we are bankrupt, the US still has massive real assets. I do not understand why China does not start buying them all as a hedge. Maybe they already are.

This week will reveal a lot of things as many reports are due. Lets hope for the best but be prepared for the worst.

HousingBoom says

The housing market is doomed!!!

You forgot add "for a long time"!!!

The bing cosby song was re-mixed.

Now it is called "Brother can you spare a trillion".

Nomograph says

Is the U.S. ANYWHERE close to where we were during the Great Depression? Nope.

it's because you're still waiting for a soup line! LOL

Nomograph says

Is the U.S. ANYWHERE close to where we were during the Great Depression? Nope.

1929 -- 2008
1930 -- 2009
1931 -- 2010
1932 -- 2011

This shit's just getting started.

$600B/yr flowing out of the country:

http://articles.latimes.com/2011/aug/12/business/la-fi-trade-imbalance-20110812

Debt To The Penny shows:

08/11/2011 9,921,146,601,533.97
02/11/2011 9,455,006,722,927.41

$500B of deficit spending just in the past 6 months.

California failing:

http://www.reuters.com/article/2011/08/10/us-economy-california-budget-gap-idUSTRE7796LO20110810

We've screwed ourselves 2002-2007 and what's left now is to figure out where we crash.

The 1920s were probity compared to the 2000s -- Gov't spending was held to 4% of GDP -- $80B in 2007 dollars. 2010 spending was $2.7T, and that's not even counting social security.

I don't think we're just going to pick ourselves up and get back to work this time. Perhaps my living in Japan colors my thinking here but I do know that there's no goddamn reason for things to start getting better and lot of reasons for things to resume getting worse.

Mind-bogglingly massive fiscal policy intervention -- trillions! -- has kept the economy from pancaking completely. But what exists now is a bunch of IOUs and promises and none of this is remotely sustainable through the end of the decade, when the baby boom will be aged 59 ~ 74 and cashing in these promises en masse.

The 2010s is not the 1930s but I think it's going to get a lot worse. Higher energy costs, reduced gov't intervention, who knows what else, but higher & higher unemployment as the post-Reagan system we built continues its collapse.

Total government spending in 2010 was $50,000 per household. Unbelievable. That's not even counting SSA. Federal spending in the 1920s was ~$200/household, nominal, $2500 in today's money.

It's all fixable, but the fixes are politically impossible at this time since the core problem is trying to run a Eurosocialist spending program on a Minarchist tax base.

Something's going to have to give here.

Other things we need to get into are: economic war with China, dramatically higher tax burdens, complete reform of health insurance (PPACA is a joke), and a return to Truman's aborted Fair Deal.

Things are going to have to get a lot worse before the get any better.

Troy says

higher & higher unemployment

Reversing this is the key to recovery.