patrick.net

Clara says

Show my the actual numbers of middle class people living in tent please?

Not tents, so much, but the multi-generational family household is coming back:

http://pewsocialtrends.org/2010/03/18/the-return-of-the-multi-generational-family-household/

>We're not Greece, and we're not really Japan for that matter either.

Agreed that Japan is a different game.

But that's not really a tent. Before the establishment of the modern welfare state the family was the primary support group. If there are cut in local and state government this only makes sense.

Houses are also larger than they were on average for a median sized home than in 1940.

Vicente says

Truthplease says

moral hazard of rent-seeking can be considerable

The rent-seeking problem is EVERYWHERE in our culture right now. One blatant one that everyone talks about, but nobody DOES ANYTHING about is patent law. Patent portfolios are traded like baseball cards. The billions spent on that activity does nothing to advance our lives. Patent law is strangling real invention and advance.

“Eagles are dandified vultures” - Teddy Roosevelt

Ok but what exactly is "advancement of our lives" On the same level millions is spent to develop better tennis shoes and not everyone plays tennis.

Troy says

We're spending $50,000 per household on government. This simply has to be cut. Cutting this burden will mean fewer government jobs.

These are not real jobs. That's one of the reasons why I have been saying the current GDP number is bogus by nearly half its magnitude. Having a bureaucrat watching over every person doesn't make the economy double in size.

The yuan is still 3-5X too weak.

Here I disagree. If China closes its door altogether like it did during their Maoist era, we would just be importing comparable amount of stuff from the next lowest priced producer, just like we did back then from Japan, Korea, Taiwan, Malaysia and Indonesia, etc.. In fact, because the next lowest priced producer would charge more than China does, we'd just get less for our money. The government deficit mentioned above is the fundamental reason why we have to import: all the bureaucrats and bureaucratic distribution that work out to be $50k per household per year has to eat, clothe themselves, have cars, and etc.. The imports are what's preventing massive inflation that take all the food, clothes, cars and etc. from the average households to give to the men/women receiving that $50k directly from the government money printing press.

We're starting to create a Jetson's economy, where productivity increases simply eliminate jobs. This is great if you can find work or have money, not so great if you can't or don't.

That doesn't make much sense at all. If goods keep falling from the sky, the result would not be mass unemployment; (ref: the old Bastiat joke about candle makers guild lobbying to ban the sun for "unfair competition") Cheaper goods should create new jobs . . . just like cheaper oil, while eliminate jobs in Texas oil fields, should create jobs in industries that use oil. What's happening is that government expansion creating "jobs" that dole out benefits to the rich via military contracts, overpriced medicine, overpriced education and above all overpriced financial gambling that is crowding out private sector job creation. Government/monopolistic "jobs" are net resource subtractors instead private/competitive sector jobs that have to create more value/resource in output than input in order to continue. Value/resources are just what is needed/available for more work to be done; i.e. more sophisticated division of labor, more jobs.

It is this net-minus effect on value/resources due to government/monopolistic resource distribution that is snuffing out the economy and killing jobs.

mdovell says

But that's not really a tent. Before the establishment of the modern welfare state the family was the primary support group. If there are cut in local and state government this only makes sense.

That's true.

mdovell says

Houses are also larger than they were on average for a median sized home than in 1940.

That's partially true. Houses built in the late 40s and 50s were typically smaller single family homes, but the bungalows of the 20s building boom were typically larger and more expandable, giving the owners the option of having an extended family or taking in tenants.

McMansions seem to be hollowed out, with two story great rooms and giant kitchens and laundries which can be nice but aren't the most efficient way of housing people.

But I'm sure we have a much better housing cushion now than we did going into the Great Depression. Even if unemployment goes up to depression like numbers, people will be doubling up in houses rather than living in tents.

Cook County resident says

people will be doubling up in houses rather than living in tents.

which is odd since we don't have a housing shortage, just a pay-the-mortgage shortage.

Troy says

which is odd since we don't have a housing shortage, just a pay-the-mortgage shortage.

Yeah, it gets tough when the house isn't paying for itself anymore and the family has to pay for it out of their paychecks when real income is stagnant or declining.

And all the huge tracts of new houses in jobless exurbs will become increasingly unattractive if gas prices continue to rise.

But, around here anyway, there are thousands of big old homes, paid or nearly paid in full, close to the remaining jobs and occupied by a single aging person or couple. There's room for their kids and maybe a couple of grandkids. By traditional economic standards, moving in with the extended family would be a reduction in the standard of living, but for alot of people it will improve their quality of life.

Vicente says

I'd be happy with rates hitting 5% or higher.

I'd be happy with rates hitting 12%. Sure it will jolt the economy, but at this point we need to encourage savings/investment and stop punishing fiscal responsibility. No one is lending because the rates are not worth the risk of lending.

bubblesitter says

We have a lost decade in front of us.

I agree. But we also have a lost decade behind us. Have we really made any financial gains from 2000-2010? If you exclude the housing bubble as you should, there's been no good economic news since the Dot Com era.

Dan8267 says

Sure it will jolt the economy, but at this point we need to encourage savings/investment and stop punishing fiscal responsibility. No one is lending because the rates are not worth the risk of lending.

Right, this is part of the problem. You can make free profits as a bankster through all kinds of government-backed methods and then give yourself a fat bonus. What incentive is there to take risks when the reward isn't so great and when the government is guaranteeing you massive profits.

If the people of Patnet put together a bank, we could do the same. Maybe we're the stupid ones.

Dan8267 says

Have we really made any financial gains from 2000-2010? If you exclude the housing bubble as you should, there's been no good economic news since the Dot Com era.

Unclear. I see the housing bubble as obscuring the aborted bust after the dotcom bubble. We never had a normal recovery, and what we saw was just a phantom recovery caused by credit. I think this is why everyone says we could get out of this by blowing another bubble.

Of course, there are asset categories that did fine from 2000-2010. Everyone focuses on S&P 500, which isn't a bad thing to focus on, but it's not the only thing in the market either.

Interesting comments as usual. My general thoughts about " The lost decade" is that we are in a situation where unless something changes with the status of the middle class then we will quite possibly be in a similar situation we're now in for untold years to come. Wages haven't budged for most in decades if you include inflation. The housing deflation is taking its sweet time and prices remain stubbornly high- especially in places like Cali where for all practical purposes the bubble is alive and well. Thus the purchasing power of the middle class remains weak.

In regards to housing, well I have to admit that I too prefer older houses in established neighborhoods. But then again- so do most rich people and hence why in most major metros these are often out of reach, leaving mostly crappy neighborhoods or a sea of anonymous Mcmansions. I fail to understand why home builders refuse to consider building houses that aren't co cookie-cutter. I've yet to see a single new house I'd want to live in. The crap they make today makes all those ugly 70's tract houses near where I grew up seem charming.

Dan8267 says

No one is lending because the rates are not worth the risk of lending.

Forget about lending. Recently I was asked by a cc company for my tax return to issue me a card,and I have a stellar credit with zero debt. Only cash can not rescue the doomed housing market. Recently I see across the board 5-10% drop in asking price of the listings that are on my watch list. Sellers and banks are in the first phase of giving up. More to come.

"I agree. But we also have a lost decade behind us. Have we really made any financial gains from 2000-2010? If you exclude the housing bubble as you should, there's been no good economic news since the Dot Com era."

I'm still amazed by some that forget the whole dot com crash. The NASDAQ hit 5,000 and now is hardly half that and it's been 11 years.

Lost decade can imply many things so I would say it more of a micro rather than macro effect. The credit boom might have made sense for those that used the money for more long term assets. If someone took equity out of a home and bought commodities they'd have the biggest smile in the world right now.

The trend of saving more certainly is not going to go away for a long time.

mdovell says

I'm still amazed by some that forget the whole dot com crash.

dotcom was small beer compared to houses.

leverage was minimal so it was just a big electronic gambling parlor. Money leaked into the bay area in the late 1990s, causing our housing bubble to lead the nation, but other than that it wasn't terribly deformative.

housing, on the other hand was the mother of all stimuli.

the home ATM was 8% of GDP during the Bush Boom:

http://research.stlouisfed.org/fred2/graph/?g=1De

$800B ~ $1.1T/yr of money influx into the population in 2003-1H07:

http://research.stlouisfed.org/fred2/graph/?g=1Dg

dot com took out people's portfolios, but there wasn't much employment in dot com stuff.

Unlike housing, construction saw a million jobs added:

http://research.stlouisfed.org/fred2/graph/?g=1Dh

plus who knows how many real estate ladies, loan brokers, etc had a taste of that trillion-dollar flow from housing -- easily another million. California alone had 500,000 licensed sales agents in 2005.

Someone said fairly recently that you cannot replace labor with capital, it's not sustainable, you can try though. At the same time we are making it against the law to be poor, or live in tent cities, etc.

Government spending,(largest employer) as it continues to drop (and it will), may or should lead us into another trench.

Health care has hyper inflated in costs, it's not an industry, it's a monopoly, not even small practices could survive. Nobody can afford to pay the costs, so government picks up the tab.

Strange country, strange times.

"dotcom was small beer compared to houses.
leverage was minimal so it was just a big electronic gambling parlor. Money leaked into the bay area in the late 1990s, causing our housing bubble to lead the nation, but other than that it wasn't terribly deformative."

I'm not saying it is in the same class by any means but I would say that bubbles keep getting larger.

"housing, on the other hand was the mother of all stimuli.
the home ATM was 8% of GDP during the Bush Boom:
http://research.stlouisfed.org/fred2/graph/?g=1De
$800B ~ $1.1T/yr of money influx into the population in 2003-1H07:
http://research.stlouisfed.org/fred2/graph/?g=1Dg"

I believe you man. Although I would say are we talking housing or credit itself? Credit extends into nearly everything.

"dot com took out people's portfolios, but there wasn't much employment in dot com stuff.
Unlike housing, construction saw a million jobs added:
http://research.stlouisfed.org/fred2/graph/?g=1Dh
plus who knows how many real estate ladies, loan brokers, etc had a taste of that trillion-dollar flow from housing -- easily another million. California alone had 500,000 licensed sales agents in 2005."

Which figures now NAR has a whole propaganda machine trying to claim housing automatically makes jobs..but their own commercials state it takes in fine print it takes the construction of two homes to equal one job.

mdovell says

"dotcom was small beer compared to houses.
leverage was minimal so it was just a big electronic gambling parlor. Money leaked into the bay area in the late 1990s, causing our housing bubble to lead the nation, but other than that it wasn't terribly deformative."

So if you cant invest in the inflated and highly risky stock market where does Joe 6 Pack invest ? Their home.. and they expect that same `10-15% appreciation year over year.

The dot.com bubble contributed to the nation turning to using their home as a primary investment.

corntrollio says

Unclear. I see the housing bubble as obscuring the aborted bust after the dotcom bubble. We never had a normal recovery, and what we saw was just a phantom recovery caused by credit. I think this is why everyone says we could get out of this by blowing another bubble.

Yep.. never corrected.

I second that.

thomas.wong1986 says

Their home.. and they expect that same `10-15% appreciation year over year.

The dot.com bubble contributed to the nation turning to using their home as a primary investment.

But it seems like most people used home equity to finance spending, not create investment. If you bought a BMW, went on a big vacation, bought a boat, etc., all that so-called "investment" was for naught. It's not like most people spent the money on healthcare, college education, and other worthy things, although maybe the smart ones did.

The DOW is headed to 7,000.

YIKES!

corntrollio says

But it seems like most people used home equity to finance spending, not create investment. If you bought a BMW, went on a big vacation, bought a boat, etc., all that so-called "investment" was for naught. It's not like most people spent the money on healthcare, college education, and other worthy things, although maybe the smart ones did.

So true...

corntrollio says

thomas.wong1986 says

Their home.. and they expect that same `10-15% appreciation year over year.

The dot.com bubble contributed to the nation turning to using their home as a primary investment.

But it seems like most people used home equity to finance spending, not create investment. If you bought a BMW, went on a big vacation, bought a boat, etc., all that so-called "investment" was for naught. It's not like most people spent the money on healthcare, college education, and other worthy things, although maybe the smart ones did.

I believe the smart ones where thinking "WTF is going on here?" in 04/05 and started reading Patrick.net

HousingBoom says

You need to Google "hyperinflationary depression" and read up on it. A depression does not need to be deflationary. Who's smoking crack now?

We're not going to have a hyperinflationary depression because all of our debt is denominated in our own currency. Countries who have experienced hyperinflation have had their debts denominated in some other currency (Weimar: gold, Argentina: USD, etc) so printing more of their own currency doesn't actually retire any debt. In our case printing money DOES retire debt - yes interest rates will go up but this will simply cause deflation to accelerate as variable interest debt will be defaulted on.

When thinking about hyperinflation, remember that this is a political event. The Fed cannot cause hyperinflation, only Congress can. And let's think about who owns most of the debt. That's right, rich people. What happens during hyperinflation? Debts are paid back with worthless dollars. Rich people do not want to lose their assets and rich people control the govt. Therefore we will not have hyperinflation. Instead we have calls for "austerity" so the rich people will be paid their money.

Deflationary depression here we come.

grywlfbg has great wisdom.

grywlfbg says

That's right, rich people. What happens during hyperinflation? Debts are paid back with worthless dollars. Rich people do not want to lose their assets and rich people control the govt. Therefore we will not have hyperinflation. Instead we have calls for "austerity" so the rich people will be paid their money.
Deflationary depression here we come.

One of the best arguements for a deflationary environment I have read.

I am so happy to have found this website....finally the truth be told!

grywlfbg says

Deflationary depression here we come.

It is pure common sense, how can we go the other way with such a massive load of debt. I just don't get it.

bubblesitter says

grywlfbg says

Deflationary depression here we come.

It is pure common sense, how can we go the other way with such a massive load of debt. I just don't get it.

This is what Charles Hugh Smith has been preaching.
http://www.oftwominds.com/blog.html

Cui Bono?

I think the title is a bit too dramatic for this thread. It ain't even depression we have.

grywlfbg says

When thinking about hyperinflation, remember that this is a political event. The Fed cannot cause hyperinflation, only Congress can. And let's think about who owns most of the debt. That's right, rich people. What happens during hyperinflation? Debts are paid back with worthless dollars. Rich people do not want to lose their assets and rich people control the govt. Therefore we will not have hyperinflation. Instead we have calls for "austerity" so the rich people will be paid their money.

Deflationary depression here we come.

Don't take it from me. I'm just an average Joe behind a computer. Peter Schiff and Marc Faber thinks it's very possible we will see hyperinflation.

John Williams from Shadow Stats also thinks it's eventually a 100% certainty.

I do believe we can see a massive deflationary collapse before and/or after hyperinflation. To say hyperinflation can not happen in the US is simply incorrect. It can happen but we don't know if it will.

Peter Schiff: Dollar hyperinflation is coming unless policy direction is rapidly changed
http://www.cobdencentre.org/2010/10/peter-schiff-dollar-hyperinflation-is-coming-unless-policy-direction-is-rapidly-changed/

Marc Faber - 100% Sure We Will Have Hyperinflation
http://www.youtube.com/watch?v=7r9o3jmyoaA

You can easily find dozens of 'investment advisers' who will tell you what you want to hear. Just like religion, join the one promising life ever after! haha.

I don't trust the ones who never reverse course and constantly pitch the same line. Such as 'buy gold!' (ok that was a good one, but now it seems to be topping?)

Kunsler is a good writer but a useless doomer peddling books IMO (he predicted end of world from the Y2k Bug hahaha what a dope!)

Schiff I don't trust due to his fathers life of legal convictions - jail? - according to rumor - and who was also an 'financial adviser' or so the rumors are (wesley snipes scenario?).

http://en.wikipedia.org/wiki/Irwin_Schiff

Mish I don't trust - always 100% negative? And political rants are useless. But I like reading him.

I do like that guy from iTulip - Eric Janzen?. And I like Charles Hugh Smith - but they are confirming what I want to believe - dangerous. Must read everything and consider all possibilities then hedge accordingly right?

Really - I don't trust anyone! I do like Robert Campbell for RE investment but thats a small niche now since free EZ $ is gone.

Did anyone see Moody's credit downgrade coming? Well, I can honestly tell you I knew it was almost a 100% guarantee it would happen this decade. It happened much sooner than I thought. More downgrades are coming down the pipe (just like Greece). Let's just say that this country is going under and too bad the majority out there are still asleep and in denial. Just give it a few more months and you will see the next big leg down in the US economy take place. I hope I'm wrong but I'm afraid I won't be

HousingBoom says

Don't take it from me. I'm just an average Joe behind a computer. Peter Schiff

Those guys you quoted don't have perfect prognostication records.

I fully believe the system would tolerate the Fed repeating another dose of wage-price inflation like what we got 1970-1980:

http://research.stlouisfed.org/fred2/graph/?g=1GW

However, I think few people actually understand what the 1970s inflation event was all about. My thesis is that compared to now, things were much more in fiscal balance and there was a lot of expansion still left in the cards.

http://research.stlouisfed.org/fred2/graph/?g=1GX

Anybody who's 100% certain of anything going forward is just trying to sell you something.

Bellingham Bob says

Anybody who's 100% certain of anything going forward is just trying to sell you something.

Very true. Only time will tell

grywlfbg says

That's right, rich people.

Sorry, I believe the proper term is Job Creators.

Bellingham Bob says

Anybody who's 100% certain of anything going forward is just trying to sell you something.

Sing it, Brother Bob. Quoting Peter Schiff as any sort of authority is misguided. These kinds of people talk their book.

bubblesitter says

grywlfbg says

Deflationary depression here we come.

It is pure common sense, how can we go the other way with such a massive load of debt. I just don't get it.

I agree. I think it's much more likely to be deflation or only moderate inflation. The hyperinflation argument seems far less likely -- what is the real mechanism? Currently we are still working off credit, i.e. deflation due to the burst of the credit bubble. If the government is throwing cash into the mix, like Japan, it is largely offsetting the credit. The inflation already happened during the bubble when credit increased significantly.

btw, I really like Schiff. He was right when it mattered, in 2007-2008.

I'd like to think the CNBC clowns knew he was right, but had to toe the party line regardless. The mere act of giving Schiff airtime was all Fox/CNBC had to do to inform the clueful.

Bellingham Bob says

btw, I really like Schiff. He was right when it mattered, in 2007-2008.

Anyone can be right for short periods of time. All it takes is staking out a position that is plausible.

Just talk to John Paulson:
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/08/10/bloomberg1376-LPOFMK1A74E901-4Q2JPC453VOJE0PMSOCLM0O906.DTL

Or if the Chron is too socialist for you, the WSJ:
http://blogs.wsj.com/deals/2011/08/19/guess-whos-getting-crushed-by-hewlett-packard-john-paulson/