From Bloomberg:
Case-Shiller Redo Shows Less Severe U.S. Home-Price Slump
The collapse in U.S. home prices that stoked the worst recession since the Great Depression wasn’t quite as severe as initially estimated, according to data from S&P/Case-Shiller.
Property values nationally fell 26 percent from the February 2007 peak to the December 2011 trough, not 34 percent as previously reported, revised data showed last week. The index will now be issued monthly rather than quarterly.
The change is the result of CoreLogic Inc. (CLGX)’s $6 million purchase of the S&P/Case-Shiller index from technology company Fiserv Inc. in March 2013. Case-Shiller has spent more than a year retrofitting its model with CoreLogic’s bigger, higher-quality data set, leading to a change in how the index looks.
Don’t read too much into that, said Case-Shiller principal economist David Stiff. The index only looks different because it’s been rebuilt with new, higher-quality data, he said.
…
In a crowded field of home-price data, Case-Shiller grabs the spotlight. Created in the early 1990s by Wellesley College Professor Emeritus Karl Case and Nobel Prize winner Robert Shiller, it’s known for its gauge of home values in 20 cities, which tracked the housing collapse in grim monthly installments.
…
Nationally, home values have climbed 19.4 percent since touching bottom almost three years ago, the new data show. They’re now 11.6 percent off the prior peak, compared with a previously estimated shortfall of 18.6 percent through the first quarter.“They can say don’t read too much into it, but it is a different picture,” said Bank of America economist Michelle Meyer. “We don’t have as big of a hole to climb out of and the gains we’ve seen so far are that much more impressive.”
Frist
fr..second
Our 12 year old daughter just started at Boston Latin yesterday. She takes a mass transit bus to school (They give the kids free bus/train passes). There is supposed to be a “supplemental” bus that picks them up at 6:42 and brings them straight to school. If the supplemental bus doesn’t show by 6:50 all the kids know to just get on the next bus and make a bus transfer at Kenmore Square like they did yesterday. I dropped my daughter off at the bus stop today, my wife did it yesterday. She just called me at work and asked me if the supplemental bus came or the kids got on a “regular” bus again. I told her, “I don’t know. I just dropped her off. There was a bunch of kids there and it looked fine.” I might be the last of the old school parents, I don’t even think she should get a ride to the bus stop which is 1.5 miles from our door. She can walk out our door take the free BC shuttle to the D line, get off at Longwood, walk 5 blocks and save all of us a lot of hassle.
BTW, no cell phone for our daughter(s). If there is any sort of emergency, there are probably 55 cell phones within a 10 foot radius of them at all times. They just need to ask someone to make a call for them. Worst case is someone says no and they have to ask two people.
I would love to see Elizabeth Warren become president.
http://money.cnn.com/2014/09/05/news/economy/elizabeth-warren-market-broken/index.html?iid=HP_LN
I know, whaaaaaa? But if she were to ever gain traction in the polls, I’d lay on the Mother of All Shorts. When she wins and the market goes into the tank (better yet, when everyone is screaming for the exits beforehand), the shorts pay off huge and I cash out. So when the anonunists take over, I’m sitting on a pile of offshore cash, and my preps will be worth many times what I paid for them. And when the anonunists are trying to keep all the employers from fleeing and put down urban riots at the same time, I’ll be here. Clot, you want to be Louis or Billy Ray?
https://m.youtube.com/watch?v=XtKydtoLucc
No cellphone you monster! How are they ever going to win in mine craft or life?
[6] I gave my daughter a gmail email account for her birthday and she thought it was the best gift ever.
No cellphone you monster! How are they ever going to win in mine craft or life?
[7] expat,
Now you are giving Captain Cheapo some ideas. I pity Little
Gator.
[7] And that was just in time too, because about 6 months later the school gave all the kids gmail accounts. I went so far as to give my oldest daughter her own Apple ID (she has a two year old iPad) with a $50 balance at the iTunes store two years ago. She still has over $20 left. That pleases me greatly.
I came across this most astonishing quote from Hillary. Buoy need the first two paras for context:
“Yet interviews with several attendees suggest it’s not a lost cause for Clinton. If she distances herself from big business, highlights her support for labor — a point that came up several times here, given the big union representation at the conference — and demonstrates she cares about the struggles of ordinary Americans, she could go a long way with this group. What it really comes down to, activists say, is a shift in what Clinton emphasizes.
“She would have to have Elizabeth Warren’s message,” said Cindy Pettibone, an activist from the Washington, D.C., area. “Against big banks and corporations, for the little guy, restoring the middle class and unions.”
Clinton, who is touring the country to promote her new memoir about her time as secretary of state, appears to have already started adjusting for this. She told PBS’s Charlie Rose this week that, if she runs, it would be on a “very specific campaign that talks about the changes you want to make in order to tackle growth, which is the handmaiden of inequality.”
Did you all get that? Growth is the handmaiden of inequality. I think anon just fell in love.
[10] LOL – Of course we need to “tackle growth”; it is the enemy of soci@lism, after all.
Do not discuss housing in our area without the word “taxes” in the mix.
[12] C’mon gary – Taxes only cost money, not really worth mentioning when you consider the big picture of home loanership.
Do not discuss housing in our area without the word “taxes” in the mix.
Nom: I just watch Warren with Katie Couric on Yahoo! yesterday…..she does faux-sincere well…..but after about 7-8 minutes, you begin to see the wheels turning in her head…..she is the same mound of crap as the rest of them….in fact, you could see that the Obama team had given her the talking points, because they matched the ones from O-man’s recent fundraisers in the NE.
[14]chifi – Exactly. I’m just hoping she’s a little more lazy and less ambitious than her “progressive” friends and ultimately says, “Fcuk it, that looks like it’s going to be more work than going back to Harvard and parking my fat @ss on something soft.”
.she is the same mound of crap as the rest of them
What does he gain from lying? What’s the point?
http://www.navytimes.com/article/20140904/NEWS06/309040063/Ohio-police-Former-SEAL-lied-about-shooting
[16] My take is that he knew the shooter and that’s what he’s covering up.
VP or not VP?
http://www.bloombergview.com/articles/2014-09-04/goldman-sachs-just-says-vice-president-to-be-polite
$600,000 just to sign the papers and then you need to rip out bathrooms and kitchens. That’s a problem. That’s $120,000 down, plus the moving expenses, plus the cost to do two bathrooms and a kitchen, ripping up carpets, sanding floors, painting the whole interior and G0d only knows if the envelope and HVAC are in good condition. Holy sh1t. So, let’s ask $600,000 and hope that somebody bites because, that’s what we want for a house that has not had a thing upgraded since it was built. Wow.
http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1433655&dayssince=&countysearch=false
re: 5
It is a very bad idea to allow your personal politics to affect your investment decisions. You will bankrupt yourself.
[19] But the taxes are less than $1,000 a month…this year, anyway.
Average newlwed couple in NJ makes 250k a year, this is a little over 2x income. Big deal.
Fast Eddie says:
September 5, 2014 at 10:14 am
$600,000 just to sign the papers and then you need to rip out bathrooms and kitchens. That’s a problem. That’s $120,000 down, plus the moving expenses, plus the cost to do two bathrooms and a kitchen, ripping up carpets, sanding floors, painting the whole interior and G0d only knows if the envelope and HVAC are in good condition. Holy sh1t. So, let’s ask $600,000 and hope that somebody bites because, that’s what we want for a house that has not had a thing upgraded since it was built. Wow.
http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1433655&dayssince=&countysearch=false
22
A Home Buyer says:
September 3, 2014 at 11:59 am
30 – JJ
In NJ 77.7% of all income tax returns single, married, married filed separately, etc. are less then 100K.
15.7% are inbetween 100K and 200K…. leaving 6.6% above 200K.
http://www.state.nj.us/treasury/taxation/pdf/pubs/soi_tables2011.pdf (Specifically the end of Table 1.7)
What’s a newlwed? Whatever it is, I guess it pays pretty well.
jj,
Stop the madness with these incomes. You sound like Michael.
I know a pair of married (to each other) ladies who just bought their first house less than a week ago up in Ipswich, MA. According to the Deed, purchase price is $350,000. Their mortgage is for $343,660, that’s 1.8% down. What gives?
Looks like a straight B of A fixed mortgage, no boxes checked, no riders. I can’t imagine the LTV came in ridiculously high because someone bought it to flip 8 months ago for $224K and Zillow values the house at $332K. Is there a special loan program for two hot white chicks with a newly adopted black baby?
public anon sighting…..
http://www.nydailynews.com/new-york/uptown/cops-taser-naked-man-knife-harlem-playground-article-1.1928910
good quote…
“He was doing his money dance, butt naked in front of the cop,” Vocals said.
“They Tasered him and he fell hard, like fried chicken. He was shaking on the ground. They fried him,” Vocals said.
[27] anon might have gone off the rails after being censored yesterday.
Get your checkbook!
http://www.dailymail.co.uk/news/article-2592344/The-13M-house-sandals-built-Birkenstock-heir-lists-luxury-New-York-City-pad.html
Here is a good use for a Tazer….
Won’t you please help these “urban strugglers”?
http://diehipster.wordpress.com/
[29] expat
Shhhh, you’ll jinx it.
16 / 17 –
Drug deal? Some other Crime? Shot himself accidentally? Shot himself purposely? Shot by a 9 year old wielding a M82A1? (caliber wasn’t listed)
Plenty of stupid out there.
Housing and Economic Trends; Bank vs. Mortgage Bank LO Comp; Reminder of FHA’s Change
http://www.mortgagenewsdaily.com/channels/pipelinepress/09052014-nonfarm-payroll-mortgage.aspx
There’s a lot of data swirling around the demographic black-hole of lending known as “the Millennials.” I’ve come to the conclusion that this is because the majority of analysts fall into that age category and deep down they enjoy writing about themselves. It’s just a theory right now. Zillow writes, “Consider the diverging cases of Boston-Cambridge, Massachusetts and Washington, D.C. They are both versions of the archetypal, walkable cities that many associate with the modern 21st century knowledge economy. And both have large populations of young adults in school or just starting their careers. In this analysis, we compare the housing choices of Millennials-young adults ages 18 to 33-in these two cities.” Archetypal? I’ll have to look that up – anything with more than three or four syllables and my brain skips over it.
142,000 jobs on the report today. No reaction here? Does that mean people are lining up in droves to buy $600,000 hunk of sh1t homes?
Here’s the breakdown:
The professional and business services category added the most jobs, 47,000. This includes management (8,000), administrative (23,000), architects and engineers (3,000), and consulting (3,000).
Healthcare added 34,000 jobs. Leisure and hospitality added 22,000. Construction 20,000. Retail was down 8,000 jobs.
ExPat [26];
Just imagine what the Peoples Republic of Massatwoshits would have done to any loan officer denying that application? At the end of the day its still OPM.
Where ignorance is bliss, ’tis folly to be wise.
#35..gary, nothing has changed since I went through this same process 2002-2006….declare victory and stay where you are and enjoy the savings……nothing is changing for a generation….
[18] expat
At a bank, the title VP means less there than just about anywhere else. Nearly everyone who has some seniority and managerial responsibility is a VP or AVP.
I think the reason has to do with the fact that regulations and corporate law require that “decisions” can only be undertaken by “officers.” Thus, in order to cut a check over a certain amount, or waive an overdraft fee, the person so authorizing must be an “officer.” This is to ensure financial and audit controls.
That said, it is hard to determine that someone isn’t an “officer” when they call them one and give them authority to act on behalf of the bank.
I always wondered why bank tellers were often VPs.
Madness? Madness is thinking wage inflation will never occur again. That’s the definition of madness. You know wages are just going to stay flat forever while prices rise into infinity. That sure makes sense, but I’m the idiot.
Fast Eddie says:
September 5, 2014 at 10:47 am
jj,
Stop the madness with these incomes. You sound like Michael.
always love when passion fruit does his daily affirmation
Me too.
There’s already wage inflation. Workers in China have been routinely getting 10% pay increases annually for the past 5 years. Eventually some will come to NJ and buy your grandma’s property too!
Michael,
A decade and half of flat line salary growth. Let me know when you see the Great Pumpkin rise out of the pumpkin patch.
1987 Condo [37],
I know. I’m in the denial stage. It’s an astonished disbelief. The ridicule doesn’t even apply any longer. It truly is nothing more than a shell game and a ruse. It was so easy to pull the trigger twice in my life on a house purchase. It was as clear as day. But now, the stench of suspicion and irregularity is so great, it’s almost impossible to be convinced otherwise. You have had to experience a normal buying process to understand the f.uckery that has unfolded in the last decade.
Analyst Warns of Potential Mortgage Crisis
http://dsnews.com/news/09-04-2014/potential-mortgage-crisis-imminent-analyst-says
While the proposed Federal Mortgage Insurance Corporation has some support on Capitol Hill, critics—including Bove—argue that investors would be unwilling to take a proposed 10 percent front-end loss on defaulted loans, spelling the end of the 30-year fixed-rate mortgage, considered the cornerstone of the mortgage market.
“This means there will be less money available to fund housing, and the terms of the available funds will be considerably more onerous than what was available under 30-year, fixed-rate loans,” he reportedly said. “This means higher monthly payments and lower housing prices. It means a crisis in the mortgage markets—and the economy.”
Believe it Gary!
My FIL’s home is under attorney review. It’s extremely under maintained and unupdated. They asked for pretty much the same thing that others in their neighborhood asked for. I swore to Gator that it would never sell, but I might be proven wrong. I guess a market is what people are willing to pay. Government finagling aside.
In other news, father of uzi child was a Hudson County Banker.
Lib [47],
What’s the price range on the house? What general location? Brunswick area?
How to separate wheat from chaff:
Michael says:I’m the idiot.September 5, 2014 at 1:05 pm
Madness? Madness is thinking wage inflation will never occur again. That’s the definition of madness. You know wages are just going to stay flat forever while prices rise into infinity. That sure makes sense, but
Does the current proposal of investors bearing a 10% loss on defaulted loans mean their total risk of loss is capped at 10% and not 100%? If yes, seems like a pretty good deal to me. But maybe not if the current environment has their losses capped at zero.
FKA 2010 Buyer says:
September 5, 2014 at 1:20 pm
Analyst Warns of Potential Mortgage Crisis
http://dsnews.com/news/09-04-2014/potential-mortgage-crisis-imminent-analyst-says
While the proposed Federal Mortgage Insurance Corporation has some support on Capitol Hill, critics—including Bove—argue that investors would be unwilling to take a proposed 10 percent front-end loss on defaulted loans, spelling the end of the 30-year fixed-rate mortgage, considered the cornerstone of the mortgage market.
4 to 500K. Freehold area. Large lot though.
I am only talking incomes of white or asian college educated or better dual income couples in prime of their life average income. They are folks expensive houses.
What the clerk in Pathmart or the welfare mama or retiree makes who cares. They cant even afford a latte in Starbucks
joyce says:
September 5, 2014 at 10:42 am
A Home Buyer says:
September 3, 2014 at 11:59 am
30 – JJ
In NJ 77.7% of all income tax returns single, married, married filed separately, etc. are less then 100K.
15.7% are inbetween 100K and 200K…. leaving 6.6% above 200K.
http://www.state.nj.us/treasury/taxation/pdf/pubs/soi_tables2011.pdf (Specifically the end of Table 1.7)
@Joyce
I haven’t looked deeply into the proposal but I doubt it would be capped.
FKA,
Fair enough, if it’s not capped… then I don’t know why they’re phrasing it as the investor bears the brunt of the first 10% loss (what about the rest?)
So by ‘average newlwed [sic] couple in NJ’ you mean something else entirely. Well said.
jj says:
September 5, 2014 at 10:40 am
Average newlwed couple in NJ
57 – Joyce
It makes perfect sense. You just aren’t excluding every extraneous data point that may inconveniently disprove with your world view.
You really need to try it some time.
I’m going to shop a pilot sitcom around based on the personalities of a married JJ and Joyce. Maybe I’ll call it “Mocks & Bonds.”
So for many decades before that, wage inflation happened on a regular basis. Before wages flat-lined, there were individuals that said it was impossible to have wages remain flat. You guys are no different than these people. If you applied logic to the field of economics, you will realize that wage inflation will indeed come back again. Things don’t stay bad forever, you need to realize this.
Fast Eddie says:
September 5, 2014 at 1:18 pm
Michael,
A decade and half of flat line salary growth. Let me know when you see the Great Pumpkin rise out of the pumpkin patch.
Michael,
No one said wages won’t rise again. It just hasn’t happened in the last decade or better and may not happen for at least another decade.
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passion fruit just can’t think outside his grandma’s box. He thinks wages must catch up to prices but cannot comprehend the possibility of prices falling down to meet wages.
I’m telling you, that is way too long based on the evidence presented. Globalization is almost over. There are not many third world nations left in the world to exploit, based on their cost of labor and shipping costs. That means, there are not many places left to exploit labor. You have just been living through a very bad time. You have to realize it will get better. Globalization brought about changes that were nothing more than a short-term trend. After a while, like in china, people demand higher wages. This is the reality. You can’t hope to take advantage of other countries forever. They catch up.
Globalization actually makes me sick. The greedy capitalists that first employed this strategy to make a quick buck have sold out this country in every way possible. That’s why we have been living through bad times. We had a clear techonological advantage and they threw it away. Every time you bring a factory to these third world nations, they learn your technology (Why do you think england tried to protect their technological secrets at the beginning of the Industrial Revolution). Only an idiot would sell out a technological advantage to save short-term on labor. Short-term because the people always demand higher wages once they figure out how little they are getting paid. Eventually the move to another country actually costs more money due to higher labor costs and big time shipping costs.
Fast Eddie says:
September 5, 2014 at 2:10 pm
Michael,
No one said wages won’t rise again. It just hasn’t happened in the last decade or better and may not happen for at least another decade.
You are speaking about deflation. Do you know how much debt govts are carrying? Deflation would destroy them in an instant, but I’m the idiot. Their debt would be impossible to pay back based on your thought process. Go do your hw.
The Original NJ ExPat says:
September 5, 2014 at 2:24 pm
passion fruit just can’t think outside his grandma’s box. He thinks wages must catch up to prices but cannot comprehend the possibility of prices falling down to meet wages.
Grandma’s box. That’s hot!
Got it, PF.
Michael says:
September 5, 2014 at 2:40 pm
You are speaking about deflation. Do you know how much debt govts are carrying? Deflation would destroy them in an instant, butI’m the idiot.Their debt would be impossible to pay back based on your thought process. Go do your hw.BTW, debts don’t protect you from deflation and the solution to a problem can’t be the same as the cause of the problem. Loose and easy credit does not fix the problems brought on by loose and easy credit.
[65]Lib – It’s a dry heat.
Grandma’s box. That’s hot!
Deflation has personally never happend to me but some men suffer from it.
My first job out of school was the final year of real inflation. My firm gave raises every six months. Costs were rising so quickly you could not wait a whole year. Raises were 7-8% shortly afterwards they went to once a year.
Go watch Fun with Dick and Jane and that scene where supermarket clerk is trying to raise prices on her meat as she is pulling it off shelf sums up how quick prices rose.
My mother used to always buy extra at supermarket the rare times she had extra money cause stuff like toliet paper just kept shooting up in price nearly every week regardless of how many WIN buttons the president made (Whip Inflation Now)
Alternatively “Chico & The Man”
Libturd in Union says:
September 5, 2014 at 1:55 pm
I’m going to shop a pilot sitcom around based on the personalities of a married JJ and Joyce. Maybe I’ll call it “Mocks & Bonds.”
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Who is going to the Jets game on Sunday?
“Madness is thinking wage inflation will never occur again.”
Check with your relatives from 200 years ago. They did not see a raise for a thousand years.
Around the time when Abe Lincoln was President we had almost 40 years of either deflation or flat prices.
Juice Box says:
September 5, 2014 at 4:29 pm
“Madness is thinking wage inflation will never occur again.”
Check with your relatives from 200 years ago. They did not see a raise for a thousand years.
Here’s Obama’s chance to go all Jimmy Carter
http://www.cnn.com/2014/09/05/world/meast/iran-us-plane-lands/index.html?hpt=hp_t2
So for many decades before that, wage inflation happened on a regular basis. Before wages flat-lined, there were individuals that said it was impossible to have wages remain flat. You guys are no different than these people. If you applied logic to the field of economics, you will realize that wage inflation will indeed come back again. Things don’t stay bad forever, you need to realize this.
That was prior to us outsourcing all of our jobs to countries that pay their workers 25 cents an hour.
On the run, but quick comment.
It’s not only that you need to have a good education, be smart, have no student loans, and be savvy enough to have a good job. But if you want to get ahead, you better be marrying someone with good credit, a paid off education, and a good job.
Nobody is talking about this, and when someone mentions it, they are berated, but let me tell you guys, it’s the f*cking truth.
I don’t care if you are making fantastic money, you marry someone with big loans and a shit job, you aren’t getting anywhere if you live on the coasts or in a major metro. You want to move to Arkansas and support Annie Mae, go for it. I don’t care how big her knockers are, or how much you are in love, it don’t matter.
It’s not that a two income household gets you ahead, it’s that a two-good-income household gets you ahead.
Laugh all you like, but there are lots of first time buyers, in their 30s, with $200k+ incomes in this area.
The stats don’t show it, because they don’t need to show it. Less than 5% of houses turn over every year, less than 30% are first time buyers, now your down to 30% of 5% – 1.5%. Now the towns we all care about, where they can afford, are 30% of that total market, we’re talking 0.45% of home sales, but it’s enough to move the needle.
Are you telling me I can’t find the 1 person in the group of 200 recent home buyers that fits this mold?
In August, 54 houses in Millburn closed with an average closing price of $1,443,415. It was not swayed by a few extremely large sales, the median was $1.24m.
1 town, nearly $78 million in real estate transactions in one month.
This was UP from last year, in both sales and sales price.
Average DOM? 38 days.
Don’t get me wrong, don’t misunderstand this to be saying everyone is rich.
But not everybody is poor either.
I’m one of them, except it was a second purchase.
“Laugh all you like, but there are lots of first time buyers, in their 30s, with $200k+ incomes in this area.”
Yes, Andrew Jackson put an end to fed bank which resulted in deflationary battles with the currency. This is why they created the fed again in 1913, deflation is worst than inflation whether you realize it or not.
jj says:
September 5, 2014 at 4:31 pm
Around the time when Abe Lincoln was President we had almost 40 years of either deflation or flat prices.
“In conclusion, the belief that fiat money, printing money out of thin air and the Fed’s policy of moderate inflation are bad are some of the most destructive and dangerous financial myths in existence today. Deflation is the death sentence for a modern economy, and is something that must be avoided, not pursued. Once an economy slips into a deflationary spiral, there is little the Fed can do, and that is why they deliberately error on the side of caution and generate a bit of inflation. It is simply an insurance policy against the destructive consequences of deflation. To fight inflation all the Fed needs to do is contract the money supply, something they have a great deal of experience doing. To counter deflation they somehow have to get people to borrow and spend, when borrowing becomes more expensive IN REAL TERMS by the day. They don’t have a great deal of experience doing that, and the Great Depression doesn’t really represent a huge success for the Fed. Pursuing a deflationary policy would force the Fed into uncharted territories where the benefits are almost non-existent and the dangers are catastrophic.”
http://seekingalpha.com/article/1330161-why-deflation-is-bad-and-inflation-is-good-monetary-policy-101
Printing Money Out of Thin Air:
Why would anyone support a system where you can “print money out of thin air” simply by turning on the printing press? That simply seems so wrong, “who would possibly defend such a system, have they never read history?” Well, yes, I’ve read history and I do defend that system. I do so because the alternative leads to catastrophic consequences like the great Depression when things go wrong. To understand why, one has to understand the basics of a monetary system. There are basically two systems:
1) An “elastic” currency which easily expands and contracts. When people refer to being able to “print money out of thin air,” they are referring to an “elastic” currency. A “Fiat” currency that has “no intrinsic value” is another description used. In the above analysis, the Fed easily adjusts M in its effort to maintain stable P and full employment Q by “printing all this money out of thin air.”
2) An “inelastic” currency which is fixed or difficult to adjust. The gold standard is an example of an “inelastic” currency. The money supply under a gold standard is effectively fixed in the short run, and expands at a random rate tied to the new discoveries of gold. The bitcoin takes it a bit further and sets a finite number of coins in existence, and after a certain date no more will be “minted.”
With an “elastic” currency you have a flexible money supply and flexible exchange rates. With an “inelastic” currency you effectively have a fixed money supply and fixed exchange rates. Being a lover of free markets, I abhor fixing anything in a dynamic efficient market because it usually leads to trouble.
Unlike an “elastic” currency, the “inelastic” currency can ot rapidly adjust like the Fed does in the explanation above. Under an “inelastic” currency the die is cast, things are set in stone and if an economic crisis occurs, there “ain’t a whole hell of a lot you can do about it.” Unlike 2008 when President Bush, Henry Paulson and Ben Bernanke ran to Congress for emergency powers, allowing them to print money until the cows come home, there is no emergency power that can magically make gold fall from the heavens and solve our economic crisis. Under an “inelastic” system, the economy is held hostage by the currency. It is literally a manufactured “tail wag the dog” situation. Unlike the elastic currency where the economy dictates the monetary policy, under an “inelastic” currency the currency often dictates the economy. The most viscious business cycles this nation has ever experienced occurred under a gold or semi-gold standard system.
The gold standard didn’t save us from dystopia. The gold standard was dystopia…The gold-standard era was a time of more frequent recessions, more protracted recessions, and more severe recessions. In other words, the bad old days.
Most puzzling about the gold standard movement is that Libertarians champion the idea. Libertarians also champion the “Austrian School of Economics” and the “Austrian Business Cycle Theory” of F.A. Hayak. The inspiration for F.A Hayak’s business cycle theory was the late 1800s business cycle, a period when there was no Federal Reserve and the business cycle was caused in part by the gold standard. One only needs to watch the movie “It’s a Wonderful Life” to understand the horrors an “inelastic” currency wreaks on society. Under the system today Mr. Bailey would simply visit the discount window at the Federal Reserve and get an emergency loan from the “lender of last resort.” An “elastic” currency, if implemented properly eliminates the threat of a bank run destroying the banking system. That is why we never heard of any bank runs in 2008.
Inflation vs Deflation, “let’s get ready to Rrruummbblllleee!!!”
Ok, we just reviewed how an elastic currency allows for the monetary policy to be maintained in a non-inflationary manner by balancing the money supply with the growth of the economy. In reality they shoot for slight inflation which I will cover later. Under a gold standard, the growth of the money supply is determined by the new discoveries of gold. There is a completely random nature to it. Tomorrow a huge find could be discovered and the money supply could double in a day, or Russia could go to war against South Africa and Australia and disrupt new gold discoveries, resulting in a stoppage or even shrinkage of the money supply. The point being, there is no nice formula like MV=PQ that works with a gold standard. M = random nature of new gold discoveries. There is no central authority that regulates the new gold discoveries to ensure the monetary system functions smoothly. What this means is that the monetary policy is separate from the economy. We could be in a Great Depression and new discoveries of gold could stop right when we need the stimulus. We could be experiencing hyperinflation and we could discover a huge new find, increasing the money supply right when we should be cutting it back. Money supply and the economy are completely separate and independent.
In reality what happens is that during times when money is in short supply, the economy experiences deflation, and when money is in excess supply the economy experiences inflation. This phenomenon is particularly hard on farmers and in fact was the main inspiration of William Jennings Bryan’s Cross of Gold Speech given during the 1896 Democratic National Convention. Under an inelastic currency, farmers would bring their crops to market at harvest. This would be a huge increase of supply of product available on the market (Q). The supply of money ([M)) however would not expand to compensate for the increase in Q. If the velocity of money (V) remains fixed, the result is a decrease in prices (P), or deflation. Often this would create a panic as bankruptcies multiply, scaring people into hording what money they did have, further shrinking the available money supply and establishing a vicious downward deflationary spiral in the economy.
Farmers would have paid top dollar when money was in ample supply at planting, but by the time a small seed had grown into multiple ears of corn, the surge in supply for a given money supply resulted in prices collapsing. Where $1 used to buy 100 seeds at planting, there are now 400 ears of corn competing for that same $1. Farmers got hit on both sides of the transaction. Under the current system the money supply would have been increased to compensate for the surge in demand at harvest, and slowly decreased back to normal levels by planting, maintaining stability in prices.
It is important to note that it was the inelastic currency that caused the problems for the farmers, not droughts or technological changes. This is the manufactured “tail wags the dog” that a gold standard creates. No one argues that falling prices are good IF the lower prices are due to increased efficiencies and market driven lower costs. There is almost constant deflation in certain sectors of the economy, namely technology and electronics. That is great, but that isn’t monetary induced deflation. Prices fall for many reasons, not just monetary. Increased technology, lower cost inputs, greater efficiency of a labor force, new discovery of natural resources and other factors can lower the price of goods and services. Those are all good things. New oil discoveries in the 1980s lowered the cost of oil. That was great, but that isn’t monetary deflation.
Monetary deflation is when the shortage of money results in an AGGRIGATE fall in prices that is totally removed from the cost structure of an industry or firm. Monetary deflation results in lower prices being forced upon the market which are not the result of normal market forces. When Henry Ford introduced the assembly line to the world, he was able to dramatically lower the price of a car AND substantially INCREASE profits. He was able to double the wages of his employees not because he was a kind man, but because the assembly line made his workers 8 x more efficient. The key point being, market driven deflation through a lowering of the cost curve through technological advancement or other market forces results in lower prices AND higher profits. That is a good thing. Wal-Mart (NYSE:WMT) maximizes profits by LOWERING prices, which is made possible due to their size and ability to negotiate cost reducing contracts. Those are all good things, but that is not monetary deflation, that is simply the natural functioning of a competitive and efficient market. The lower prices aren’t being forced upon WMT or Henry Ford because no one has any money to spend because it doesn’t exist in adequate supply.
Still not sold?
Still not sold that monetary deflation is a bad thing? Consider this example of a fast food worker at a restaurant with a $1 menu. Assume the worker gets paid $5/hr. Therefore the worker must serve 5 $1 cheeseburgers an hour to cover their wage (yes, I’m ignoring the cost of the cheeseburger, this is just an example). The equilibrium productivity is 5 cheeseburgers per hour for the employee. Now imagine there is a bout of monetary deflation and the price of the cheeseburgers drop to $0.50. The employee must then either serve 10 cheeseburgers per hour, or they won’t be able to justify their wage. If they can’t double their productivity, their wage would need to be cut in half. That is why unemployment tends to increase during periods of deflation. Only the most efficient firms with the most productive employees can survive.
Nope, still not sold?
Okay, I’ve saved the best argument for last. Fixed income instruments and interest rates easily adjust to inflation. If inflation picks up by 5%, interest rates easily increase by 5%, there is no ceiling on interest rates, they can go as high as needed to compensate for inflation. That however isn’t true for deflation. Interest rates can’t adjust for deflation, interest rates can’t go below 0% (actually they can, but that is beyond the scope of this article, and requires unique financial instruments). In the above example imagine the owner of the restaurant taking out a 5% loan when inflation was 2%. The nominal rate is 5% and the real rate is 5%-2% = 3%. If inflation goes up to 5%, the owner effectively has a 0% interest rate loan, and if inflation goes to 10%, the owner is effectively paying 5% less on the loan. Inflation transfers wealth from lender to borrower. Anyone that took out a 30 year mortgage loan in the 1950s was celebrating by the end of the inflationary 1970s, as they saw their mortgage payments in both nominal and real terms evaporate, and value of the home far exceed the original value of the mortgage. My in laws bought their home for $15,000, and my parents purchased almost 4 acres and a large home for $29,000. The current estimated values are near 10x the original purchase prices or more. That is a system that works. Over time wages, asset prices and prices slowly changed, and banks are compensated for inflation through the inflation premium built into the interest rate. It is a win, win, win situation.
Now, consider what happens with deflation. The restaurant owner takes out a 5% loan, and 10% deflation occurs. The real rate of interest in now 15%, or 5 x the original 3% real rate. Assuming a monthly loan payment of $1,000, it used to take selling 1,000 cheeseburgers to make the payment, now it requires selling 1,100 cheeseburgers to cover the payment. Deflation transfers wealth from the borrower to the lender. That is why in the Cross of Gold speech, Williams Jennings Bryan points out that the bankers love the gold standard, banks get paid back with more expensive dollars. Imagine taking out a mortgage that has a $1,000/mo payment, and you are making $1,000/wk. In that situation your mortgage payment is the equivalent of 1 weeks wages. Now imagine 10% deflation causing your wage to fall 10% to $900/wk. It now takes 1.11 weeks to earn your mortgage payment. In the real world, wages are sticky, and what would most likely happen is that you would either have to increase your productivity or get laid off.
Read what I posted, put on your thinking cap, and realize wage inflation is coming. They will not allow deflation. This idiot will say it once again, deflation is the end of every govt in this world, it is not happening unless there is some huge revolution happening across the globe.
grim,
Speaking for myself only, I of course believe people (not the majority) are doing well or very well, some of them in the young demographic. My responses were solely in reference to the nonsense JJ posted.
PF,
Do you believe banks lend out their deposits?
Sure it works on paper:
When you read the following analysis, envision riding a bike and having the rear gear skip to a lower level. The immediate response is to peddle faster, but because you are in a lower gear, the faster peddling only maintains the current speed, the speed doesn’t get “inflated.” In this analogy, the peddle speed is the Fed printing money, and changes in the speed of the bike is inflation or deflation. The Fed’s objective is to maintain a peddle speed that keeps the bike at a manageable smooth pace.
If only life was as easy as the formula suggests. In reality life isn’t that simple, and 2008 proved that. From the linked chart above it is clear that velocity isn’t constant. Velocity dropped from over 10 in 2008 to about 6.5 today. In MV=PQ, if V drops, M has to increase to compensate. That is why the Fed “printed all this money out of thin air,” they were doing it in part to compensate for the collapsing velocity of money. As people were stuffing money in their mattresses and burying it in mason jars in the back yard, the Fed was printing money to prevent a monetary collapse. They were effectively peddling faster to compensate for the velocity gear jumping to a lower level.
In 2008 we also fell into a deep recession, some call it the Great Recession. In the formula MV=PQ, if Q falls, and V falls, to maintain balance, the Fed has to increase M and “print all this money out of thin air,” or the system collapses. Not only did the V gear jump, the Q gear jumped as well. The Fed had to peddle double time, just to keep moving forward. So in the above linked chart showing M1 Money Supply increasing from about $1.4 trillion in 2008 to about $2.5 trillion today, much of that simply went to compensating for a lower V and lower Q, and this is why we “printed all this money out of thin air,” and don’t have inflation…yet.
Ben, that 25 cents an hour worker will be extinct soon. Those markets are drying up fast to the point where companies don’t want to take the risk to build a factory in those markets because the wage growth will cut off any benefit of moving there in a few years.
Ben says:
September 5, 2014 at 5:08 pm
So for many decades before that, wage inflation happened on a regular basis. Before wages flat-lined, there were individuals that said it was impossible to have wages remain flat. You guys are no different than these people. If you applied logic to the field of economics, you will realize that wage inflation will indeed come back again. Things don’t stay bad forever, you need to realize this.
That was prior to us outsourcing all of our jobs to countries that pay their workers 25 cents an hour.
Grim,
Check out the Oyster Festival this weekend at the south end of the boardwalk. If you can’t walk from your condo park in the now defunct Ivan and Andy’s restaurant parking lot on Lake drive (across from the paddle boats) – it’s free.
“Firstly, here’s a short explanation of bank lending. Under normal circumstances, deposits and loans are more-or-less equal across the banking system as a whole. This is because when a bank creates a new loan, it also creates a new balancing deposit. It creates this “from thin air”, not from existing money: banks do not “lend out” existing deposits, as is commonly thought. You can see this clearly on the chart. Until 2009, deposits and loans were roughly equal.
But since 2009 there has been a very evident change. There is a large and growing gap between loans and deposits. So what is causing this?
Firstly, banks, households and businesses have been deleveraging. That means they are paying off (or writing off) loans and not taking on any more. Damaged banks don’t want to lend, damaged households don’t want to borrow and fearful businesses don’t want to invest. The combination of these three factors means that both the supply and the demand for loans are considerably below the levels prior to the financial crisis. This explains the evident fall in loan creation (red line) in 2009. Though the line is now rising. Seems banks are lending, actually, though not at the rate they were before the crisis.
Secondly, the Fed has been doing QE. QE involves buying assets held by the private sector, both banks and investors. When the Fed buys from banks, the bank simply exchanges one asset (UST or MBS) for another (new reserves), and there is no change in deposits. But when the Fed buys assets from private sector investors, the purchases are intermediated through banks, and the newly-created dollars that investors receive in return for their assets are credited to their bank deposit accounts. Consequently bank deposits rise. This is the reason why the blue and red lines have diverged. Without QE, the two would have remained in sync: we would have seen a fall in both loans and deposits, since money is destroyed when loans are paid off or written off.
But, what about all those reserves on which the Fed is paying interest? Surely this is a major reason why bank lending is so far below deposit creation? After all, if banks can be paid interest on risk-free deposits at the Fed, they won’t want to lend, will they?
This chart appears to support that argument. Sober Look has “added back” to the loan line the excess reserves held by banks at the Fed:
Well, that’s amazing. Loans + excess reserves = deposits. Therefore placing excess reserves at the Fed must be crowding out lending, mustn’t it? So what we need to do is cut the interest rate on excess reserves, preferably into negative territory. Then banks will be forced to lend out the money.
No, just no. Double entry accounting is sufficient to explain this effect. It tells us absolutely nothing about the lending behavior of banks.
When the Fed buys private sector assets from investors, it not only creates new deposits, it creates new reserves. This is because a new deposit (liability) in a bank must be balanced by an equivalent asset. When banks create deposits by lending, the equivalent asset is a loan. When the Fed creates deposits by buying assets, the equivalent asset is an increase in reserves, also newly created. So it does not matter how much lending banks do, if the Fed is creating new deposit/reserve pairs by buying assets from private sector investors then deposits will ALWAYS exceed loans by the amount of those new reserves.
Of course, banks do make a few pennies in interest by paying less on deposits than they receive on reserves. So cutting interest rates on excess reserves might encourage some banks to lend more to the private sector in order to compensate for loss of earnings on the reserve/deposit spread. But they might choose to increase credit spreads instead. They could do this by cutting deposit rates, but they don’t have much room to do this, since if deposit rates are much below zero people will hoard physical cash instead. So they might raise interest rates on loans instead – which is not exactly an encouragement to households and businesses to borrow. Or they might simply absorb the cost, squeezing their profits and limiting their ability to grow their capital base by retaining earnings. I thought we wanted them to increase their capital? Hitting their profits with negative interest rates on reserves certainly isn’t going to help with this.
The volume of excess reserves in the system is what it is, and banks cannot reduce it by lending. They could reduce excess reserves by converting them to physical cash, but that would simply exchange one safe asset (reserves) for another (cash). It would make no difference whatsoever to their ability to lend. Only the Fed can reduce the amount of base money (cash + reserves) in circulation. While it continues to buy assets from private sector investors, excess reserves will continue to increase and the gap between loans and deposits will continue to widen.
Banks cannot and do not “lend out” reserves – or deposits, for that matter. And excess reserves cannot and do not “crowd out” lending. We are not “paying banks not to lend”. Positive interest on excess reserves exists because the banking system is forced to hold those reserves and pay the insurance fee for the associated deposits. It seems only reasonable that it should be paid to do so.”
joyce says:
September 5, 2014 at 6:53 pm
PF,
Do you believe banks lend out their deposits?
I hope some of you read this since the Austrian school of economics has some of you under a love spell.
“The gold standard didn’t save us from dystopia. The gold standard was dystopia…The gold-standard era was a time of more frequent recessions, more protracted recessions, and more severe recessions. In other words, the bad old days.
Most puzzling about the gold standard movement is that Libertarians champion the idea. Libertarians also champion the “Austrian School of Economics” and the “Austrian Business Cycle Theory” of F.A. Hayak. The inspiration for F.A Hayak’s business cycle theory was the late 1800s business cycle, a period when there was no Federal Reserve and the business cycle was caused in part by the gold standard. One only needs to watch the movie “It’s a Wonderful Life” to understand the horrors an “inelastic” currency wreaks on society. Under the system today Mr. Bailey would simply visit the discount window at the Federal Reserve and get an emergency loan from the “lender of last resort.” An “elastic” currency, if implemented properly eliminates the threat of a bank run destroying the banking system. That is why we never heard of any bank runs in 2008.”
Can’t believe there’s no parade here for Urrp finally giving in and turning on the money printer…
The race to the bottom just entered the bell lap.
Oh. Now that I scan above this post, I see michael is in full mental vomit.
The stats don’t show it, because they don’t need to show it.
Are you talking the vast ocean of muppets that are underwater and can’t sell? Or is it the ones that have the Pottery Barn house with zero assets? Big hat, no cattle.
So just let crash and go to hell? Man, you must love misery.
Uzis for Tykes says:
September 5, 2014 at 8:16 pm
Can’t believe there’s no parade here for Urrp finally giving in and turning on the money printer…
The race to the bottom just entered the bell lap.
Passion Flower too young to know that financial crashes are like fires in giant forests. They clean out the underbrush and allow the ecosystem to regenerate.
Too bad the only ecosystem Passion Flower knows is the one that supports unicorns and skittles.
Set the motherfcuker on fire, and let’s barbecue a few damn unicorns.
Prussian Floorer is a little bit of a hoot. The longer his posts, the less we read, and on his shorter posts, the more he entertains us with how little he knows. He’s an acceptable court jester in my book.
1. Pay your property taxes.
2. Pay OFF your mortgage.
3. If you can’t afford to do 1 & 2, relax. You probably have 6-10 years before any action is taken.
Probably not news and apologies if posted
http://www.cnbc.com/id/101976646
plume (100)-
Wake me up when that score reaches the “D” (default) it deserves.
If the federal govt didn’t take so much money from this state to give to all the other crap states, this state wouldn’t even be having this conversation. Det didn’t end, nj won’t either. Bring on the inflation so these govts can wipe out the debt and shut you people up with the damn debt. In an elastic monetary system, debt is not as big of a deal that you make it out to be. If we were tied to the gold standard, then I would agree that every govt in debt is screwed beyond belief.
You have to remember that things will change. In the 70’s they thought our economy was doomed with runaway inflation and how did that work out? Come on, you guys fall for the fear a little too easy. When has a human society ever come to an end over debt? Never, why? Because debts can always be defaulted and start over again. Human society will just keep on marching. Look at Argentina, is nobody living there right now? How many times are they going to go bankrupt? It doesn’t matter, life goes on.
Comrade Nom Deplume, a.k.a. Captain Justice says:
September 6, 2014 at 6:57 am
Probably not news and apologies if posted
http://www.cnbc.com/id/101976646
I understand what you are saying. But if you can avoid the decimation of everything in order to regenerate, why not do it? Think of the fed printing money as a strategy of setting a controlled fire. You don’t want to destroy the whole forest, because then you are living in misery for years.
I’m glad the fed pumped money into the system and prevented a giant crash that would have left us all reaching for guns to protect ourselves. I’ll pass on that outcome and go with the fed on trying to prevent that kind of outcome at all costs. I haven’t really been in that much pain since 2008, my life has actually improved every year since 08. Thank you to the fed!! I appreciate it!! Stock market is up, housing has stabilized, and if you aren’t a low skilled worker, you are doing fine. What’s so bad?
Uzis for Tykes says:
September 5, 2014 at 8:46 pm
Passion Flower too young to know that financial crashes are like fires in giant forests. They clean out the underbrush and allow the ecosystem to regenerate.
Too bad the only ecosystem Passion Flower knows is the one that supports unicorns and skittles.
Will. Not. Feed. Troll.
Greenspan. Bernank. Yellen. With a legacy of leadership like that, all is certain to end well. And now, we have the ECB joining us in turning into a giant hedge fund with money-printing privileges.
Suck on this, unicorn fart:
“Compare and contrast.
From the Chicago Mercantile Exchange 2012 10-K:
Customer Base
Our customer base includes professional traders, financial institutions, institutional and individual investors, major corporations, manufacturers, producers and governments.
And from the Chicago Mercantile Exchange 2013 10-K:
Customer Base
Our customer base includes professional traders, financial institutions, institutional and individual investors, major corporations, manufacturers, producers, governments and central banks.”
http://www.zerohedge.com/news/2014-09-05/whats-point-hiding-it-any-longer
The struggles of the working class. Three minimum wage jobs to earn a decent living
“Fernandes earned a living working minimum wage jobs at three different Dunkin’ Donuts stores. When she died last month in the parking lot of a convenience store in Elizabeth, she had just completed an overnight shift at a shop in nearby Linden.”
http://www.nbcnewyork.com/news/local/Funeral-Maria-Fernandes-Newark-Woman-Dead-Car-274068251.html?partner=nbcnews?par=nbcnews&site=nbcnews.com&cm_ven=nbcnews&cm_cat=Article
Do we need to unearth passion fruit’s previous comments in which he thought banks held their mortgages to maturity? Yeah, let’s listen to his opinion on econ
I’ll respond later after eating my free lunch.
Michael says:
September 6, 2014 at 9:20 am
I understand what you are saying. But if you can avoid the decimation of everything in order to regenerate, why not do it? Think of the fed printing money as a strategy of setting a controlled fire. You don’t want to destroy the whole forest, because then you are living in misery for years.
I’m glad the fed pumped money into the system and prevented a giant crash that would have left us all reaching for guns to protect ourselves. I’ll pass on that outcome and go with the fed on trying to prevent that kind of outcome at all costs. I haven’t really been in that much pain since 2008, my life has actually improved every year since 08. Thank you to the fed!! I appreciate it!! Stock market is up, housing has stabilized, and if you aren’t a low skilled worker, you are doing fine. What’s so bad?
Last 90 degree day for a while as I sit here by my pool and now I hear thunder off in the distance headed this way. I am going to miss summer.
More hot for teacher, Joisey-style:
http://www.nbcnewyork.com/news/local/New-Jersey-High-School-Teacher-Charged-Sex-Freshman-Student-274152151.html?_osource=outbrain_recirc=obinsite
This Summer has been great. About 1 out of 4
Summers since we moved here in 2002 haven’t required any air conditioner placement. This is one of those Summers.
Are you ready for some football? Took Philly in my survivor pool.
A couple years back, used to be in this survivor pool with 8400 entrants at a 100 dollar a pop before the guy got taken out due to the bad economy. It was 2009 and the govt needed money. 840,000 pot will do that. Sucks, they had to ruin a good thing. The pool required you to pick two teams a week from week 3 on. I made it all the way to week 15, which was the final 30. Should have sold my spot for 5,000, but I was too close. 5,000 or a good shot to win 800,000 tax free. Obviously, risked it and lost. I was 1 week away from the money. Was a fun ride.
Bracing myself for the onslaught of inane NFL talk…
It will all be OK as long as the Jets & Giants still suck.
A couple years back, used to be in this survivor pool with 8400 entrants at a 100 dollar a pop before the guy got taken out due to the bad economy. It was 2009 and the govt needed money. 840,000 pot will do that. Sucks, they had to ruin a good thing. The pool required you to pick two teams a week from week 3 on. I made it all the way to week 15, which was the final 30. Should have sold my spot for 5,000, but I was too close. 5,000 or a good shot to win 800,000 tax free. Obviously, risked it and lost. I was 1 week away from the money. Was a fun ride.
800,000 cash? At that point, there’s no incentive for the bookie to not just keep it all to himself. I bet he didn’t even get busted.
Happy, happy, joy, joy…
“Say hello to the next financial crisis, brought to you courtesy of the dumbest new bill of the week: H.R. 5148: Access to Affordable Mortgages Act.
Ordinarily whenever an individual wants to borrow money for a mortgage, the bank conducts due diligence… both on the borrower as well as the property.
It’s in the banks’ interest (as well as the banks’ depositors) to ensure that the property is at least worth as much as the amount being borrowed. Duh.
Congress doesn’t agree. Apparently when banks conduct property appraisals, that seems to unfairly discriminate against some segment of the population trying to buy crap properties.
And we certainly can’t have that going on in the Land of the Free.
So with HR 5148, Congress aims to exempt certain ‘higher-risk mortgages’ from property appraisal requirements.
Curiously, this legislation reverses several provisions in the 1968 ‘Truth in Lending Act’.”
http://www.zerohedge.com/news/2014-09-06/meet-access-affordable-mortgages-act-how-congress-will-create-next-crisis
In the land of unicorns and skittles, it matters not that there be sufficient collateral underlying mortgages.
Every man a king!
A little light reading for Passionturd:
“Allegedly, we can now stop bank runs and ignite short-term growth spurts, or keep the overall “price level” advancing on some arbitrarily chosen path of 2 per cent. But we can achieve all of this only through monetary manipulations that must create imbalances in the economy. And as the overwhelming temptation is now to use “easy money” to avoid or shorten any period of liquidation, to go for all growth and no correction, distortions will accumulate over time.
As we move from cycle to cycle, the imbalances get bigger, asset valuations become more stretched, the debt load rises, and central banks take policy to new extremes to arrest the market’s growing desire for a much-needed cleansing. That policy rates around the world have converged on zero is not a cyclical but a structural phenomenon.
Central bank stimulus is not leading to virtuous circles but to vicious ones. How can we get out? Only by changing our attitudes to monetary interventions fundamentally. Only if we accept that interest rates are market prices, not policy levers. Only if we accept that the growth we generate through cheap credit and interest rate suppression is always fleeting, and always comes at the price of new capital misallocations.”
http://www.zerohedge.com/news/2014-09-05/monetary-stimulus-obsession-it-will-end-disaster
It was legit. Guy ran it for over 20 years. The bust was in the newspaper. You can’t play around with that kind of money. You would literally get killed (obviously mafioso were involved). In order to get in the pool, someone had to vouch for you that knew the guy that ran it. You knew his address, hence why he was taken out right after the collapse in 2008. Cops were def in the pool and someone needed a big bust to get over 800,000 cash. It’s as simple as that.
Ben says:
September 7, 2014 at 10:16 am
A couple years back, used to be in this survivor pool with 8400 entrants at a 100 dollar a pop before the guy got taken out due to the bad economy. It was 2009 and the govt needed money. 840,000 pot will do that. Sucks, they had to ruin a good thing. The pool required you to pick two teams a week from week 3 on. I made it all the way to week 15, which was the final 30. Should have sold my spot for 5,000, but I was too close. 5,000 or a good shot to win 800,000 tax free. Obviously, risked it and lost. I was 1 week away from the money. Was a fun ride.
800,000 cash? At that point, there’s no incentive for the bookie to not just keep it all to himself. I bet he didn’t even get busted.
Whether you attempt to stop the crash and fail, or don’t do anything and let it correct itself, you end up with the same result. So why not try and prevent these total collapses with monetary policy and manipulation? Why? Just watch it go to crap? You have to try and do something, esp if the result will be exactly the same if you try and fail, or don’t do anything at all.
So why not try and lower the blow for everybody in this economy. The whole point is to bring some sort of stability. What you guys want is constant giant crashes where there is almost nothing left. Then rebuild and do it again. We are in an advanced stage of economics and it’s only natural that we find ways to manipulate and bring stability to the economy.
Right now, it seems to be working fine. I would choose the QE program that the fed took any day over the other option, which was the total collapse of the economy. With the total collapse, who the hell knows what will happen. Human civilization might regress under that scenerio, just like it happened when Rome fell. You have 1000 years of regression called the “dark ages”. Called the dark ages because the lightbulb was not on in their brains. Violence and strength become the go to leaders. People with a brain are lost. People were dirty and basically lived like animals a 1,000 years after people in Rome were living pretty close to today’s standards.
An economies function is one thing. To motivate individuals to participate on a regular basis. That’s why debt doesn’t matter. As long as people are still waking up and have reason to continue being productive, the economy is working. Once people see no need to get up and go to work, the economy has failed. Govt debt in an economy based on a fiat currency is not really that bad of a thing at all, as long as that debt keeps the economy going. Obviously, under a fiat currency, the govt can push inflation if the debt gets too large. You guys look into the details too much. The economy is not perfect and never will be, but as long as the fed can keep this economy rolling, I’ll back them up.
Uzis for Tykes says:
September 7, 2014 at 10:42 am
A little light reading for Passionturd:
“Allegedly, we can now stop bank runs and ignite short-term growth spurts, or keep the overall “price level” advancing on some arbitrarily chosen path of 2 per cent. But we can achieve all of this only through monetary manipulations that must create imbalances in the economy. And as the overwhelming temptation is now to use “easy money” to avoid or shorten any period of liquidation, to go for all growth and no correction, distortions will accumulate over time.
As we move from cycle to cycle, the imbalances get bigger, asset valuations become more stretched, the debt load rises, and central banks take policy to new extremes to arrest the market’s growing desire for a much-needed cleansing. That policy rates around the world have converged on zero is not a cyclical but a structural phenomenon.
Central bank stimulus is not leading to virtuous circles but to vicious ones. How can we get out? Only by changing our attitudes to monetary interventions fundamentally. Only if we accept that interest rates are market prices, not policy levers. Only if we accept that the growth we generate through cheap credit and interest rate suppression is always fleeting, and always comes at the price of new capital misallocations.”
http://www.zerohedge.com/news/2014-09-05/monetary-stimulus-obsession-it-will-end-disaster
Joyce:
Run to the Washington Post website. Big story on Asset Forfeitures by small rural, suburban cops, and how they use a private company to share tips on shaking down highway drivers, specially if they have natural tan.
Best is, even if illegal by federal statue, these monies routinely make up 20%+ of their budget. ” Badges, badges, we don’t need stinking badges.”
Once again proof that rentals are HOT (even in Warren County):
Had an unexpected vacancy (Tenant lowballed a local estate sale that was not advertised yet…and got it!).
Anyway, first day sign is out on the lawn (duplex) the phone calls came flooding in.
Signing with a new tenant tomorrow night for more than I was charging the former.
No need for section 8’s, charity cases ect.
As soon as my new home is completed (year?) or maybe before I’m picking up another multi-family rental (public utilities and structurally sound cosmetics, heat, plumbing, elect. I’ll do myself if that’s all it needs).
Contrary to what the MSM and others say, for many (even with decent jobs and credit) it’s hard to get a mortgage these days and the price of a house (especially for the entry level/first time home buyer) is still just too much unless they can live on ramen, beans and walk to work.
No cellphone you monster! How are they ever going to win in mine craft or life?
There’s some kid that was at the school I teach at that would videotape himself playing minecraft. Apparently, he makes a few million a year now still doing just that.
That is why we never heard of any bank runs in 2008.
You mean other than Bear Stearns and Lehman Brothers?
It was legit. Guy ran it for over 20 years. The bust was in the newspaper. You can’t play around with that kind of money. You would literally get killed (obviously mafioso were involved). In order to get in the pool, someone had to vouch for you that knew the guy that ran it. You knew his address, hence why he was taken out right after the collapse in 2008. Cops were def in the pool and someone needed a big bust to get over 800,000 cash. It’s as simple as that.
Link?
Ben, you’re asking a moron to turn turds into gold.
http://jrwinkle.com
Ben says:
September 7, 2014 at 8:17 pm
It was legit. Guy ran it for over 20 years. The bust was in the newspaper. You can’t play around with that kind of money. You would literally get killed (obviously mafioso were involved). In order to get in the pool, someone had to vouch for you that knew the guy that ran it. You knew his address, hence why he was taken out right after the collapse in 2008. Cops were def in the pool and someone needed a big bust to get over 800,000 cash. It’s as simple as that.
Link?
clot…..the last 15 seconds is for you…..
http://www.youtube.com/watch?v=y0V4TZAyd8I
chi, this is why I am the way I am:
http://www.bing.com/search?q=to+hate+like+this+is+to+be+happy+forever&form=APMCS1
“I am a sick, sick man. Not only am I consumed by hatred, I am delighted by it. I have done some checking into the matter and have discovered that the world’s great religions and wisdom traditions tend to frown upon this.
Therefore, dear reader, I need your prayers. But even more than I do, the University of North Carolina’s basketball team, the object of my obsession, needs them. Here is the depth of my sickness. It is several years back on a beautiful afternoon during basketball season. The cable is out. (Note to self: Kill Time Warner.) I am alone in my apartment in New York City, frantically hitting the refresh button on my computer screen, getting the updates of Carolina’s shockingly bad performance against its archrival, Duke. So far, the Heels have shot 18 three-pointers and hit exactly five.”