Wed 1 Jul 2009
Housing bubble burst “with a vengeance”
Categories: Foreclosures , Housing Bubble , New Jersey Real EstateFrom the Record:
20% of construction jobs vanish
One of every five construction jobs in Bergen, Passaic and Hudson counties disappeared over the past year, as building activity plummeted in the face of a recession and housing bust, federal labor officials said Wednesday.
The 21 percent drop in North Jersey construction jobs from May 2008 to May 2009 — from 32,700 to 25,800 — was a record in the 19 years that the federal Bureau of Labor Statistics has been keeping track, according to Martin Kohli, an economist with the BLS’s New York office.
“The housing bubble burst sooner in other parts of the country than it did here, but it seems to have come with a vengeance to Bergen, Passaic and Hudson,” Kohli said.
Even as housing construction nationwide slowed dramatically, building continued at a healthy pace in Bergen and Hudson counties until mid-2008, especially along the Hudson River waterfront. But last summer, construction fell off there as well.
Overall, Bergen, Passaic and Hudson employment shrank by 26,200 jobs, or 2.9 percent, to 884,300 jobs in May 2009. Aside from the construction losses, Bergen, Passaic also saw substantial job cuts in professional and business services, information and financial activities. The decades-long loss of factory jobs also continued.
…
The overall New York metropolitan area, including North Jersey, lost almost 233,000 jobs — 2.7 percent of the total — from May 2008 to May 2009.While the job losses were painful, they were less severe than the nationwide employment contraction of 4 percent. In the region as a whole, the biggest job losses came in construction and manufacturing.
The finance sector also lost jobs, but not as many as expected, Kohli said. Financial employment declined by 4.7 percent in the New York metropolitan area as a whole, and 5.7 percent in Bergen, Passaic and Hudson.
“Last fall, we had an unprecedented financial crisis,” Kohli said. “We expected to see the bottom fall out of financial employment in the area.”
frist again
Sloppy seconds
turd
#273 Doyle from last post. It did. Shocking? Unbelieveable? Yep but it did> I have acces to tax records,and that is what it sold for.
3b,
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?&district=0252&block=102&lot=2&qual=
#5 grim: That is where I got it from.
may have already been discussed, but Fannie and Freddie to now offer refis for bagholders at up to 125% LTV rather than previous 105% LTV
http://www.bloomberg.com/apps/news?pid=20601087&sid=ar1xMVXL_Xw0
#5 grim: Add lets not foregt those property taxes of almost $11,0000!!!
(3) Sold @ Peak pricing
Category 3 is very frustrating to me but 90% of the time, when I look up the new owners, the last name is of East Asian decent…. Liu, Huang, Wu, etc
If home prices are down 21% from peak and putting 20% down,this east asian either paid cash or put close to 50% down at peak prices.
Do they know something we don’t know?
Loved this grim phrase from this morning:
“a stagnant stack of asks”
veto/kettle from the am thread:
“i see your point here but someone might argue that 2000-2006 was a bubble in everything, including corporate profits and personal incomes and they would have a decent point.”
I can’t agree. Look at median personal income adjusted for inflation (including the cost of housing!) for that period, and I think it’s pretty clear that the middle class, at least, experienced nothing like a bubble in personal income.
skep-tic says:
may have already been discussed, but Fannie and Freddie to now offer refis for bagholders at up to 125% LTV rather than previous 105% LTV.
I don’t know who is really being helped with all this. If you lied about your income, you’re $100k underwater, and your mortgage is 10X your annual, refinancing it to a 30 year fix is not going to help much. You’re still F*cked
“Crabtree & Evelyn files for Chapter 11 protection.”
Damn! Where am I going to get my $40 bar of soap?!?
Ben et al
“Any rational person clearly understands why nearly all economists missed this crisis. There’s a simple answer to that one… look at their education.”
The problem with this thesis is that the “economists” who all missed this crisis seem to be the republicans on CNBC, whereas the ones who predicted it all seem to be university professors.
ben
“Krugman is a joke. He got it in 2005, and by that time, that makes puts him behind about a few million other people,”
Wrong. Krugman was fighting loudly and in print with Uncle Alan Greenspan as early as March ‘04.
And if everyone had figured it out by 2005, then why was every bank in the nation still buying burnt paper in the summer of ‘07?
Because people like Hackett and Glassman rule our economic discourse.
Aside from Krugman and Roubini and Baker, there was also Brad DeLong at Berkeley.
I’m sorry, but most of the economists who were right on this crash were liberal university professors, and most who were wrong were working for the Bush admin or cheerleading it on TV. This ain’t an economic crisis that OB created in the past 5 months since he entered office, convenient as that would be, since maybe then we could end it in 5 months, too.
3b (271, other thread)
Are those waves in the basement?!???
The whole thing is flooded and the spiel yammers on about the finished basement.
Soosh- there’s definate flood damage and what looks like mold on the drywall.
The history on the sales for that is nuts. I don’t think you can get financing without a C of O, or if you can, it’s not easy.
“Look at median personal income adjusted for inflation (including the cost of housing!) for that period, and I think it’s pretty clear that the middle class, at least, experienced nothing like a bubble in personal income.”
SirRents, here is the income bubble i see. Around 2000, it really kicks up nicely.
http://tinyurl.com/kventp
US Census Income per Capita, all races, inflation adjusted.
Also, how can median income include the price of housing?
Veto, it looks pretty flat to me, and actually dips a bit.
Am I reading it wrong?
Everything I’ve read, indicates that income either remained flat from 2000 now or essentially contracted based on increases in cost of living. From personal experience, I can say that after adjusting for inflation, increased healthcare copays/contribution, and the 10% wage reduction (better than fired), I am essentially exactly where I was in 2000.
#16 lisoosh: Come on!! Can we be serious here! We are talking blue ribbony, Beregn Co for God’s sake, and a train too!!
And close to NYC transportation ( who care if no one is hiring there;its still close)
“I’m sorry, but most of the economists who were right on this crash were liberal university professors, and most who were wrong were working for the Bush admin or cheerleading it on TV. This ain’t an economic crisis that OB created in the past 5 months since he entered office, convenient as that would be, since maybe then we could end it in 5 months, too.”
Please…this isn’t Conservative vs Liberal argument. The economists who are at Mises.org easily identified the housing bubble in it’s opening stages (2001-2002) and precisely blamed George Bush and Alan Greenspan for the problems. They beat your boy Krugman to the unfolding by 4 years (when we still had time to take action). They were sounding the alarm while Paul Krugman was cheering on Alan Greenspan’s interest rate cuts making things worse.
Furthermore, I already clearly explained why it’s laughable to even credit Krugman with anything, given that the policy recommendations he gave back in 2001 were precisely what caused the bubble! On top of that, Krugman was down right clueless on the health of the financial sector, by his own admission. I would suggest you take off the blinders and stop trying to pin this is a Liberal vs Conservative argument. Keynesian economists fail to recognize that Keynesian stimulus measures led to our housing bubble, as do the Monetarist. In fact, our good Congressman Ron Paul identified and made it public in Congress before any of the aforementioned names you mentioned, including Baker said anything about the bubble.
I don’t even understand why you even brought up Obama. I said nothing about him.
Paul Krugman said in 2001, “economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.”
By the time he mentioned anything about the bursting of the bubble, it was already too late, as it had already peaked. And you want to give him credit? For what?
Guys like Marc Faber, John Hussman and Peter Schiff saw this coming the second Alan Greenspan announced his first interest rate cut. I suggest you learn who the real economists are.
Low interest rates, expansionary money policy, fiscal spending, deficits, this is the precise Keynesian remedy to the recession of 2001-2002! This is also the sole driving force of the housing bubble inflation which caused prices to rise when they were supposed to fall! I’d like to hear a better explanation of the cause of the housing bubble outside of Keynesian Stimulus, because I’m all ears.
#19 - From personal experience…I am essentially exactly where I was in 2000.
That sounds about right. What changed was access to debt. Wages stayed the same, leverage went up.
“it looks pretty flat to me, and actually dips a bit.”
Silera, maybe its flat from 2000 to 2008 but look at the longer term trend. it keeps going up up up for decades, which is ok iguess, but thats not inflation. And then during the 1990s it goes up more than ever.
the double peak in 2000 and 2006 looks exactly like the dow.
actually the late 70s, late 80s and early 2000s all have bubbles that look almost exactly like the OFHEO Home Price Index.
[11] sir,
but as for us, we rode that bubble for all it was worth. That was one of the reasons I jumped at firm jobs, even though I never thought I would last. I knew that kind of bank wasn’t sticking around.
Ben (From previous thread) -
Sorry dude. The article from mises.org which you posted reads like a pimply faced teenager screaming about his date being stolen by somebody else.
That allegation about Krugman is laughable, to say the least, after you read it in the context of the article. I say - If the US has to get rid of its debt, it needs to inflate. This does not mean I am advocating inflation, but pointing out one possible outcome of the Fed’s actions.
Can you provide some links to articles by Austrians which predicted the bubble in 2001? Although, I do admit that they were early to the game. But so was Roubini.
Your statement that no keynesian economist predicted the bubble is easily disproven - Roubini, Baker, DeLong, Reich.
I do not know enough about economics to comment on whether Keynes had it right or not. Maybe not. It does sound like free ponies for all. However, Keynes does advocate higher taxes and lesser government spending during times of plenty. *This* part of Keynesianism is easily forgotten by our governemnt. It is cut taxes and raise spending all the time.
As I said before, we are monetarists on the way up and Keynesian on the way down. Don’t work that way.
However, if there is one thing I have learnt over the past two years, is that no side is completely right or completely wrong. Ideology blinds us to solutions which might come from the other side.
Vic, I got a post in moderation with links. Hopefully, this one goes through…
Robert Blumen, 2002
“Fannie Mae Distorts Markets”
http://mises.org/story/986
Jim Puplava, 2002
“the Fed has created another asset bubble in real estate”
http://www.financialsense.com/Market/puplava/2002/bubblarious.htm
Congressman Ron Paul, 2003
“Fannie Mae and Freddie Mac Subsidies Distort the Housing Market”
http://www.house.gov/paul/congrec/congrec2003/cr091003.htm
Marc Faber, 2003
“The Financial Implications of Reflation”
http://www.gloomboomdoom.com/gbdreport/download/GBD0306.pdf
Peter Schiff, 2003
“Several Federal Reserve officials have been recently trumpeting their belief that there is no housing bubble”
http://www.europac.net/externalframeset.asp?id=66&type=schiff
I’ll give you 2 dozen others if you want…
18 veto - “Also, how can median income include the price of housing?”. I wasn’t saying it does. But income has to be looked at in the context of buying power. I can’t look at your stats at the moment, but if median income rises, say 5%/yr and the cost of housing rises 12%/yr, is there an income bubble?
Ben,
not only you’re a sore loser, but history has already proven you wrong.
Give it up!
HC
Let us not forget the Lord’s prayer:
Please, Lord.
Just one more bubble.
We promise not to piss it all away this time.
3b [267 from previous thread]
>> but from an earlier post the assumption
>> that all Asians have lots of money, and are
>> not stupid with it is obviously false.
Who made this assumption?
yo’me [9]
>> Do they know something we don’t know?
If they were financing 95%-100% I would say maybe they see inflation knocking on the door but if you are suggesting they are paying cash then…. Chinese Mafia Money Laundering?
…or just stupidity.
#29
Affinity fraud or mortgage fraud perhaps?
The allegations against Krugman are not laughable. Here’s Krugman for ya…
2001: “You must ask the opposite question: why in the world shouldn’t you lower interest rates?”
May 2, 2001: “However, let’s give credit where credit is due: Mr. Greenspan has cut rates since then. And while some of us may have been urging him to move even faster”
July 18, 2001: “Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don’t know”
August 8th, 2001: “Housing, long-term rates haven’t fallen enough to produce a boom there.”
August 14th, 2001: “housing, which is highly sensitive to interest rates, could help lead a recovery…Housing demand depends on long-term rather than short-term interest rates — and though the Fed has cut short rates from 6.5 to 3.75 percent since the beginning of the year, the 10-year rate is slightly higher than it was….mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place”
October 7, 2001
“In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.”
Dec 28, 2001
“The good news about the U.S. economy is that it fell into recession, but it didn’t fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed’s dramatic interest rate cuts helped keep housing strong even as business investment plunged.”
There you have it. A full year of cheering on interest rate cuts to directly stimulate an already overvalued housing market. How can you not criticize him for these quotes? He wanted housing pumped up when it shouldn’t have been.
“not only you’re a sore loser, but history has already proven you wrong.
Give it up!
HC”
Please elaborate…
btw…no need to act like a jerk.
Vic, my post with links is in moderation. I agree with you and what I am precisely fighting is the ideological barriers that put blinders on people. All of the economist I reference are independents who have been critical of nearly every political figure. That being said…I almost choke on my food when people try to align my views with George Bush and his crony economic advisers. I friggin voted for Ralph Nader!
may have already been discussed, but Fannie and Freddie to now offer refis for bagholders at up to 125% LTV rather than previous 105% LTV
How much further does the government think home prices are going to fall?
If home prices have stabilized, why would such a dramatic move be necessary?
However, if one thought that perhaps there was going to be additional decline, a dramatic move like this might be thought necessary.
LMAO
http://www.vanguardngr.com/2009/06/29/nnpc-gazprom-to-set-up-nigaz-joint-venture/
THE Nigerian National Petroleum Corporation (NNPC) and the Russian Energy giant, Gazprom have signed a Memorandum of Understanding (MOU) to establish an all encompassing joint venture coampany called ‘NiGaz Energy Company Limited’ in pursuit of plans to monetise the country’s huge gas reserves.
Ben (31) -
I do not want to come off as a Krugman apologist but the statements which you posted were from 2001 when the economy was in deep recession. This is the classical Keynesian response to anything - cut rates, get the government to spend more. However, you do see him calling for a bubble in 2004 which is when the party really started. The punchbowl should have been taken away after the recession ended, but was not.
However, just low interest rates did not cause the housing bubble. If we had stuck to 20% DP, 28% DTI and other factors which are taken into account now, the bubble would have never occured. Don’t forget to take into account the massive securitization due to lax regulation of financial entities.
If you have quotes from 2003 by Krugman still pressing for low rates, then I would gladly concede the point.
BTW, Krugman is a staunch partisan and mixes too much politics with his economics for my liking. Some of his stuff does make sense though.
“But income has to be looked at in the context of buying power”
SirRents, think of the flip side.
and the 70% homeownership rate.
Rising home prices added to most people’s wealth.
#30 If they were financing 95%-100% I would say maybe they see inflation knocking on the door but if you are suggesting they are paying cash then…. Chinese Mafia Money Laundering?
…or just stupidity
Do you really think they can get a bank that will finance 95% at 2006 prices appraising at -22% from 2006?
I am simply suggesting to think outside the box not with a linear way of thinking.
chinese mafia? there are indians too.
Keynes’ primary flaw is he assumes demand is a function of a single product and fails to recognize that a recession is a misallocation of capital and products supplied to the market. He assumes it’s falling demand that is the problem. Falling demand is not the problem. We have too many houses and they were priced too high. Any attempt to stimulate demand of a market where we have gross misallocation of resources relegated to certain sectors fails to prevent the badly needed correction in those markets.
For example…it’s obvious from the Case Shiller Charts that housing was due to fall in 2001, because it was already beyond it’s historic inflation adjusted highs where we had previous collapses. Keynesian stimulus pumped up the housing market at that point which prevented the market from contracting. It expanded even more. As a result, we ended up with way more people employed in a sector that is now falling much harder than it was poised to fall 8 years ago. Dean Baker and Nouriel Roubini were the only two ahead of the curve. Krugman was cheering on the rate cuts. I would like to see any evidence of any Keynesian who said the rate cuts were a bad idea…
#29 Please, Lord.
Just one more bubble.
We promise not to piss it all away this time.
Amen.Let us ride another bubble.
#38 - veto - Rising home prices added to most people’s wealth.
Only if they sold and were free and clear. A cash-out refi is not wealth, it is debt.
#42 A cash-out refi is not wealth, it is debt
A debt that you can walk away with the cash in Bermuda.
tosh still a cash out refi added to alot of people’s income.
just like credit cards subsidized income.
You are right to say they are stuck with the debt but they pay that in later years little by little, prob not as fast as most people’s homes appreciated.
“Please, Lord. Just one more bubble.
We promise not to piss it all away this time.”
Grim, i second this prayer. i’d do anything for another gubmint sponsored pump and bust that will eventually leave our children to run around naked searching for bread crumbles.
“Only if they sold and were free and clear.”
Also, tosh, prices have been appreciating since 97 right? we’re still maintaining 04 price levels. many are still sitting on equity.
oh the carnage.i cant imagine the wealth destruction if prices go to 2000 levels.
we’re going back to shlitz beer and leftover steakums.
“If you have quotes from 2003 by Krugman still pressing for low rates, then I would gladly concede the point.”
Paul Krugman, 4/24/03
“I don’t agree, and neither do most private-sector economists; they think that the economy will remain sluggish for a while. And the Fed can’t remedy the situation by cutting rates, because it has already cut them almost as far as it can. So since the economy could use a demand push right now, for the time being a fiscal expansion - either a tax cut or a spending increase - would indeed create jobs.”
This article is about how he thought we were in the “liquidity trap” (the same thing he claims we are in right now). He is arguing that since the Fed has run out of room, we need to ramp up spending from the government. According to Krugman’s other writings and his ideology, it’s obvious that he didn’t want us to raise rates while he believes we are in a liquidity trap.
Btw…I’ve searched through all his archives previously. I can’t find one single article of him urging to stop the madness or raise interest rates in this entire decade.
I disagree about the 20% down payment statement. The bubble was well in it’s 5th inning before we resorted to lowering down payments below 20%.
As far as the 2001 recession goes. Yes, it was going to be bad. But letting the recession was our best option for long term health to the economy.
#44 -It added to the perception (delusion ?) of wealth.
It also became a crutch for a lot who would otherwise have realized they were poor and kept the consumer merry-go-round going for a little more.
What are we going to replace it with?
“It added to the delusion of wealth”
Indeed.
My original should have said that the re price bubble added to many people’s ‘income’ during those years, not ‘wealth’.
thanks for helping clarify that.
THE Nigerian National Petroleum Corporation (NNPC) and the Russian Energy giant, Gazprom have signed a Memorandum of Understanding (MOU)
I can’t believe the Russians actually fell for that ol’ email scam.
FROM THE DESK OF MR COLE JOSEPH
47 HILTON AVENUE,
VICTORIAL ISLAND,
LAGOS NIGERIA.
Dear Friend,
I am a director in the foreign affairs department of the Nigerian
National Petroleum Corporation (NNPC). I got your email during a
personal research on the Internet and wish to use this opportunity to
notify you of the existence of a certain amount we wish to transfer
overseas for the purpose of investments and importation of goods from
your country.
In May 2001, a contract of sixty-six million United States dollars
($66,000,000) was awarded to a foreign company by my ministry. The
contract was supply, erection and system optimization of supper polyore
200,000-bpsd, system optimization of 280,000-monax axial plants and the
computerization of conveyor belt for Kaduna refinery. With only the
consent of the head of the contract evaluation department, I over
invoiced the contract value by thirty four million United States dollars
($34,000,000).
The contract has been completed long ago and the foreign company fully
paid off. But in the office files and paper work, the company is still
owed USD34M representing the over invoiced amount. Because this amount
is derived from the award and execution of a foreign contract, there is
no way the money can be paid locally. That is why I contacted you so
that we can do the project together for our mutual benefit. We have
concluded every necessary arrangement to transfer this amount to a
foreign account as the final phase payment for the said contract. What
we need is your bank account into which we can deposit the money and
after we shall come over there to share the money with you.
Ben (47) -
Thanks for that. I concede. Krugman is indeed a one trick pony.
However, cutting rates in itself during a recession is not bad. Borrowing has to be cheaper for business during hard times so that recovery is faster. However, the government should create a regulatory framework which encourages investment in productive sectors rather than causing mal-investment.
The trick of course, is to raise rates when the economy has sufficiently recovered. However, the Fed is also beholden to political interests. I think that one of the reasons that Fed did not raise rates was the election campaign of 2004.
#46 veto - many are still sitting on equity
Oh, I have no doubt a lot are. IMO, and it’s just opinion, these are people like my parents who saved, didn’t spend extravagantly and kept out of debt. In other words, not the sort of people a consumer economy really needs.
i cant imagine the wealth destruction if prices go to 2000 levels.
The Fed is trying very very hard to help avoid it.
I’ll second Grim’s prayer as well. Only I do promise to piss it all away on wimmens, booze and Italian cars.
Only I do promise to piss it all away on wimmens, booze and Italian cars.
A true patriot. Step up soldier, your country needs you.
#46 veto
many are still sitting on equity.
I’m not so sure about that. With most towns having at least a 10% turn rate and who knows how many tapping the heloc well, what percent of home owners are sitting on equity?
Do i remember right that 30% of homes in the US don’t have a mortgage?It was posted in this board.
safe, good question. probably a large percent of owners but im only guessing.
but if they cashed out the equity and used it to fix up their kitchen or go back to school, then at least they are sitting on upgraded stainless steel granite kitchens, or additional degrees, which should still have some value.
but if they used it to go to atlantic city for the night, than you are right, they are probably no longer sitting equity or anything like it.
‘30% of homes in the US don’t have a mortgage’
yome, considering all the baby boomers, 30% shouldnt be surprising. interesting factoid though.
ok ladies, good chatting with you. thanks for the education. im out of here.
see you in morning.
Vic,
cutting rates isn’t the worst thing. The problem is, the Fed made a stupid move cutting rates in the late 90s with their Y2k fear mongering and gave us the tech bubble. They did the same thing 2 years later to give us the housing bubble. A few rate cuts may have been justified. But realistically, cutting them all the way down to 1% was beyond ridiculous, and the Keynesian fear mongering that was persistent in Krugman and Bernanke’s writings throughout the earlier part of the decade screaming “we were in the liquidity trap” were the primary driving forces justifying rate cuts that drastic. The fact of the matter is, we weren’t in the liquidity trap, and 2004-2007 proved that. I don’t even believe the liquidity trap is a valid theory.
But fast forward to 2009. They have our interest rates at 0%. We are running even bigger fiscal deficits. Our economy is in worse shape. And once again, Krugman, Bernanke, and all their other buddies from Princeton are again saying we are in a liquidity trap.
We’ve clearly seen the results of what happens when we tried to escape the first, so called, liquidity trap. The 2nd will not be pretty.
And in closing, I would encourage anyone to note that Paul Krugman has openly stated that their is no danger of inflation at all. Remember that 4 years from now. I’m sure I’ll be on a different internet board in 2013 referencing Krugman’s quotes from 2009 showing how he advocated policies that caused the worst inflation this country has ever seen.
18 veto
Looked at the chart and had the same reaction as silera. Looks like real income didn’t improve during the RE bubble. I’d further note that what I was referring to, specifically, was middle class income. I’m aware, because I represent them, that executive’s compensation went through the roof during those years. So my presumption, based solely on instinct, admittedly, is that Joe the Plumber’s income (if he actually were a plumber), didn’t do so good. (Read those last four words with a Brooklyn accent.)
although looking at that chart again, looks like we all owe a debt of thanks to Nixon, Carter, and Clinton on personal income. Looks like the only difficult years were during Ford, the first Reagan administration (Shore?), Bush I, and all of Bush II.
21 ben
“I don’t even understand why you even brought up Obama. I said nothing about him.”
Fair enough. That was attributable to a plethora of other posters who seem to deem OB the root of all current trouble.
[Paul Krugman said in 2001, “economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.” ]
In 2001, he was correct. The problem with Bush/Greenspan monetary policy wasn’t that they lowered rates in 2001, it was that they kept them that way for the next 6 years.
I generally like Faber and Schiff, so I won’t argue there, although Schiff was right in theory for 7 years before he was right in practice, so I’m not sure how much that gets you. I’m underwhelmed by the idea of calling an RE bubble in 2001 when there wasn’t much of one yet.
24 Nom
Oh yes. Yes with a feather on top.
There was a real estate bubble in 2001. By 2001, Real Estate was already at it’s previous inflation adjusted high that were observed twice in the past 100 years. Whenever real estate made those previous seen highs, they always gave up all their gains adjusted for inflation. We saw it happen in the late 1980s. Real estate was poised for a 10-15% correction down adjusted for inflation in 2001. If you look at the Case Shiller chart, this is blatantly obvious from a visual perspective.
25 victorian
“However, Keynes does advocate higher taxes and lesser government spending during times of plenty. *This* part of Keynesianism is easily forgotten by our governemnt.”
Bang on. During the bubble, our prescient one-party government was cutting taxes and sending spending through the roof.
Where’s the recession??? Buy a home now before these bonuses end up moving homes prices like in 2005.
Wall Street Pay Approaches 2007’s Records
http://online.wsj.com/article/SB124649352055183157.html#mod=testMod
“Financial employment declined by 4.7 percent” and you call this “unprecedented financial crisis”?? Give me a break.
26 ben
3 of 5 articles were written after Krugman took on Greenspan in the pages of the Times. As I said, I like Faber, and I like Schiff, but the idea that everybody but the university professors knew what was going on is silly.
32 Ben
Same thing. In late 2001, lowering rates was the right course of action. By a year later it wasn’t. So pointing out that Krugman advocated lowering rates in 2001 doesn’t get you anywhere, no matter how many citations you have.
34 ben
“All of the economist I reference are independents”
You just lost me.
- Peter Schiff donates
solely to republicans:
http://fundrace.huffingtonpost.com/neighbors.php?type=name&lname=schiff&fname=peter&search=Search
- Ron Paul IS a Republican
- Robert Blumen donates only to Ron Paul
- Puplava and Faber get a pass
And I think it’s disingenuous to pretend that mises doesn’t have conservative leanings, which is fine, but not sure why you’d want to pretend otherwise.
34
“I friggin voted for Ralph Nader!”
I don’t know how to respond to that without being a jerk, so I’ll let it stand for itself.
35 grim
don’t go reaching conclusions via logical progression again. Leads to nothing but trouble.
38 veto
“Rising home prices added to most people’s wealth.”
This is an argument that pretorius used to make. I don’t buy it. If you didn’t sell, it didn’t add to anything. Unless you sell, rising home prices are no more than a perception, not a reality. So the perception of rising home prices did not add to most people’s wealth any more than the rise in the value of Pets.com stock added to people’s wealth. Income is what goes into your pocket or bank account. If an exec is granted stock options with a Black-Scholes value of $10 million, he has no income until he exercises those stock options. And if the options expire without ever getting in the money, he didn’t “lose $10 million.”.
40 ben
“He assumes it’s falling demand that is the problem. Falling demand is not the problem. We have too many houses and they were priced too high. Any attempt to stimulate demand of a market where we have gross misallocation of resources relegated to certain sectors fails to prevent the badly needed correction in those markets.”
I agree with this insofar as stimulating demand for housing right now is monumentally stupid. Stimulating demand in other areas; not so much.
“tosh still a cash out refi added to alot of people’s income.
just like credit cards subsidized income.
You are right to say they are stuck with the debt but they pay that in later years little by little, prob not as fast as most people’s homes appreciated.”
appreciated? Then why is half of america underwater?
debt is not income
46 veto
“oh the carnage.i cant imagine the wealth destruction if prices go to 2000 levels.
we’re going back to shlitz beer and leftover steakums.”
Too right. Imagine if housing does what the DJIA did a few months back, and returns to 1997 levelsl. Oh, the humanity!
59 ben
“Krugman has openly stated that their is no danger of inflation at all.”
This is misleading at best. If you read what he actually writes, he does expect inflation. He doesn’t expect it to be systemic, however, and therefore not a danger.
On this, I happen to disagree with him, but I think it serves to be accurate about what the debate is, and “Krugman has openly stated that their is no danger of inflation at all” doesn’t do that.
64 ben
“There was a real estate bubble in 2001. By 2001, Real Estate was already at it’s previous inflation adjusted high that were observed twice in the past 100 years.”
Just curious where you are getting those numbers?
77.SirRentsalot says:
July 1, 2009 at 10:52 pm
debt is not income
Sir: It is if you found a way to spend the cash and in the current situation find a way to evade having to pay the debt back and/or have it dismissed.
The Big Inflation Scare
By PAUL KRUGMAN
Published: May 28, 2009
Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one
But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics.
First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.
http://www.nytimes.com/2009/05/29/opinion/29krugman.html
“Grim, i second this prayer. i’d do anything for another gubmint sponsored pump and bust”
i have to correct you on the nomenclature.
never say pump & bust. cause there is no such thing.
Its a pump & dump. you can easily make money on both the pump and dump. The same people whom fraudulent induced the avg sap to pump up the RE markets are the same crumb bums that are maken money on the dump.
Its a win win for a small group of insiders.
and yes… you can pump and dump anything, even towns…
aka. short Vegas.
Now, let me hop back up on that turnip truck I just fell off….
SAS
“The housing bubble burst”
conspiracy theory. doesn’t exist. bitter renters.
you blokes talk RE to yee blue in the face, but what are you going to do when the real bubble that is slowly unraveling hits its tipping point.
hark, what other bubble?
the over production of cheap goods & widgets.
you won’t hear that on your CNBC.
SAS
Grim,
RE grim says:
July 1, 2009 at 9:29 pm
THE Nigerian National Petroleum Corporation (NNPC) and the Russian Energy giant, Gazprom have signed a Memorandum of Understanding (MOU)
I can’t believe the Russians actually fell for that ol’ email scam.
——————————–
I thnik you didn’t get it.That’s for real, but the joit venture name is NIGAZ!
U.S. Diesel Supply Climbs as Goods Orders Slip
Why is the price of heating oil and diesel up?
http://bloomberg.com/apps/news?pid=20601109&sid=atxf.CanQuMU
joit=joint
CNBC = complete mouthpieces for Wall St. to take your money.
and you give it to them, ha ha!!
you best look in the mirror, think about your 401k and your job, and ask yourself, “did I just get pumped & dumped”.
answer: yes, you did.
SAS
3b says:
July 1, 2009 at 7:41 pm
“#16 lisoosh: Come on!! Can we be serious here! We are talking blue ribbony, Beregn Co for God’s sake, and a train too!! ”
So…they include a dinghy to traverse the subterranean lake?
“joint”
the best cash crop.
free markets still exist somewhere.
SAS
June 26 (Bloomberg) — Nigeria’s joint venture with OAO Gazprom will help boost the West African country’s earnings from natural gas, said Mohammed Barkindo, chief executive officer of Nigerian National Petroleum Corp.
Gazprom, Russia’s gas export monopoly, on June 24 signed an agreement in the Nigerian capital, Abuja, to form a company called NiGaz Energy Co. Ltd. that will invest in gas production, transportation and infrastructure in Nigeria.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoD8g9EfNcx0
“NYSE Halts Transparency, Feels Goldman Program Trading Disclosure Is Unnecessary”
http://zerohedge.blogspot.com/2009/06/nyse-halts-transparency-feels-goldman.html
81 chi
That it is. That it is.
An increase in theft is definitely an increase in income.
finally saw transformers 2. it wasn’t that bad. you know you’re getting fireworks from Michael Bay … yeah, it went on too long, and yeah, the storyline was a bit contrived … but it’s a special effects big budget blockbuster. what did you expect?
thanks to everyone who responded to the non-RE question tuesday.
SirRentsalot,
“debt is not income”
there are always 2 sets of books.
SAS
grim says:
June 30, 2009 at 8:49 pm
Witness MLS# 2693043 - 85 Park Ave, Unit 304
*Killer* apartment in the Reserve in Glen Ridge. 5th best High School in the state according to NJ Monthly, and literally a block from the midtown direct train. Included garage parking is icing on the cake.
grim, if you are one block from the train, can’t you hear it?
well, off to bed, looks like I’m the only one who burns the midnight oil.
like that Borat Obama says: last
SAS
“looks like I’m the only one who burns the midnight oil.”
I’m still at the office.
still_looking is still_awake.
sl
“Just curious where you are getting those numbers?”
Case Shiller Inflation Adjusted National Index
“Same thing. In late 2001, lowering rates was the right course of action. By a year later it wasn’t. So pointing out that Krugman advocated lowering rates in 2001 doesn’t get you anywhere, no matter how many citations you have.”
Nonsense. The rates got down to 1% and Krugman was busy writing articles about how 0% may not even be low enough and therefore the government should increase spending. And no, lowering rates wasn’t the right course of action. It resulted in a big financial crisis and a weaker dollar. They were already too low to begin with at 6%. We needed to raise rates to purge the economy of the excesses of the late 90s and increasing our national savings rate, which was already dismal at the time. Any lowering of interest rates discouraged savings and encouraged reckless consumption in an economy that was already suffering from underproduction and overconsumption.
“- Ron Paul IS a Republican
- Robert Blumen donates only to Ron Paul
- Puplava and Faber get a pass”
Rofl, Ron Paul is Republican in name. He openly campaigned against John McCain in November. Robert Blumen donates only to Ron Paul? So friggin what! That doesn’t mean they weren’t both 100% right!
If you want to refer to mises.org as conservative, then you are sadly mistaken, you fail to acknowledge what the modern day incarnation of a conservative is. Mises.org openly criticizes the policies of Richard Nixon, Ronald Reagan, and Both George Bush’s more than they do Jimmy Carter and Bill Clinton. These are the guys that have been the face of conservatism for 40 years!
“Bang on. During the bubble, our prescient one-party government was cutting taxes and sending spending through the roof.”
So what? You won’t find me defending a single action of the Bush administration.
“However, Keynes does advocate higher taxes and lesser government spending during times of plenty. *This* part of Keynesianism is easily forgotten by our governemnt.”
Which is the exact reason why Keynesian policies should never be implemented in the first place. The government has an 80 year history of not reversing course after their Keynesian medicine. But let us simply revisit the facts. Keynesianism didn’t help us in 2001. It just made a bad problem worse at a later date.
Unfortunately, inflation is the only way to resolve the debt crisis other than by bankrupting 1/3 of the populace, 2/3 of the states and the USG to top the pile. It is also the only way (unless we are willing to completely get rid of the free trade policies - which I think will be a tremendous thing to do.The dirty little secret about beggar thy neighbor policies is that they actually work for the majority of the population; they are really bad for the investment bankers) to stop and hopefully reverse the decline of the U.S. productive economy. Overall, we need to design the most painless way to step on a sea urchin - how to reduce the average consumption by 20-30% and not cause social unrest…
“On this, I happen to disagree with him, but I think it serves to be accurate about what the debate is, and “Krugman has openly stated that their is no danger of inflation at all” doesn’t do that.”
Actually, it does. Because people are holding Krugman up like he’s the genius economist that knows everything when the fact of the matter is, his policies that he believes in result in utter disaster…and any solution he proposes will result in greater unemployment and greater inflation down the road.
ben [103]
Our problem in 2001 as it is now was globalization (which pulls down median incomes all things equal). Credit expansion was the way to make people not feel this drop in real income. Both D and R establishment can’t oppose globalization for their own ideological reasons: D because it improves the life of the poor of the world (at our expense) and R because it allows corporations to reduce expenses (because they could pay the poor of the world much less than they paid us).
“Rofl, Ron Paul is Republican in name. He openly campaigned against John McCain in November.”. Yeah, and joe lieberman isn’t a Democrat. And I notice you conveniently dropped Schiff from that discussion. You may protest, but you source one side of the aisle. I’m not quite sure why you’ve gotten so breathless, since I generally agree with you about monetary policy, but you’d be more pursuasive if you came across as a bit less of an ideologue.
105 ben - when you refer to generic “people” who are doing X, it begins to sound like a straw-man argument. And it’s all well and good to predict a crash in the djia in 2001, but if you miss an 7-year run-up of 80% as a result, there are a lot of people who are doing better than you. Schiff is an investment advisor, not a policy-maker, and on actual 2001-2007 results, he didn’t do that well. Now, if he had been at the fed in 2001, we’d all be better off.
Ben - “Which is the exact reason why Keynesian policies should never be implemented in the first place. The government has an 80 year history of not reversing course after their Keynesian medicine.” - ya see, that sounds like a very strong argument for NOT lowering taxes during an economic downturn. And yet, somehow I am quite sure that that was not what you intended.
“ya see, that sounds like a very strong argument for NOT lowering taxes during an economic downturn. And yet, somehow I am quite sure that that was not what you intended.”
Don’t assume my positions. I’m sick of the cut taxes vs increasing spending debate.
I’m for decreasing spending.
Roll drumming A
Quality the better