By The Tim on April 10, 2009
Here is your open thread for the weekend beginning Friday April 10th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
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Posted in Open Thread | Tagged open_thread
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
Another “special” market is getting slammed – Manhattan….
http://www.nytimes.com/2009/04/09/realestate/manhattan/09real.html
Goldman Sachs wants to pay back TARP funds and considering doing it through a stock offering. What?, if they didn’t need the money as they said why don’t they just move the money back to the gov? Hmmm….perhaps they did need it after all. I for one hope they pay it back and that the gov. makes it clear that this was a one time offer and once it paid back it’s not a ping-pong game where they can get it back again. I.e If GS becomes insolvent after having paid TARP back it should be immediate failure with no bailout or support of any kind, imo.
I’d guess it’s because of the concern for punitive (and retroactive) action out Congress.
Also, I think they benefited a lot from the bailout of AIG, so that probably reduces the amount they need to.
RE: Kary L. Krismer @ 3 – Very true, AIG was just another funnel of funds to the banks and GS in particular, Paulson made sure to look after his old buddies at GS.
RE: patient @ 4 – But as a practical matter, I don’t know how you would save AIG and pick and choose among the third party beneficiaries. There’s been a lot of talk of foreign banks benefiting too. That’s not necessarily a bad thing, but in any case, I just don’t see what you could do about it.
RE: Kary L. Krismer @ 5 – I’m just saying that GS would have been one of the biggest loosers on an AIG failure which likely gave Paulson added incentive to rescue AIG due to his history with GS.
Patient,
Look at how bad of an impact Lehman’s failure had on the world. AIG being the worlds largest insurer and being responsible for default insurance, the impact would have been devasting. Most like money would have frozen overnight, you woudln’t be able to use your bank card, you wouldn’t be able to move money. If it was frozen long enough paychecks would be worthless, think about the consequences. Policemen not being paid, not being able to pull money out of your account, no one showing up to work, so traffic lights don’t work, gas pumps turn off, eletrical grids shut down, supermarkets get looted…
Its unfortunate we had to bail them out, and yes wall street is an old boys club. But lets not pretend it wasn’t necessary.
Can you still advertise a $70,000 price drop if that price drop happened in September 2008? Apparently so: http://www.redfin.com/WA/Lake-Stevens/1914-106th-Dr-SE-98258/unit-24/home/12319708
Revenues are falling much faster than predicted. I’m betting we don’t make it to the end of the year.
“Receipts from individual income taxes fell 27% in March, versus year-earlier figures. Individual refunds are up 14% so far this year. Compared with a year earlier, corporate income tax receipts fell 90% to $3.4 billion.”
http://economicedge.blogspot.com/2009/04/us-budget-disaster-strikes-march.html
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USA Today article predicts that 2010 will be the year that a housing recovery will begin for Washington State. According to the article, by the year 2010 “….excess supply of homes will be substantially depleted and new construction will be needed to meet demand.”
Housing Recovery, State by State
RE: banker @ 7 –
Peter Schiff has a great rebuttal to this argument, although it takes about 75 minutes!
http://www.youtube.com/watch?v=EgMclXX5msc
I think that the argument that we cannot inflate ourselves out of this crisis is becoming to look more and more fishy. The reality is that in 6 months time inflation will set in. Maybe not a huge one – but nonetheless some inflation. And it could possibly go higher depending on what the Fed does.
When inflation sets in – housing will be immune to inflation if it is prices right. Let’s hope that WA state real estate prices stabilize within a year.
I think the key will be to monitor supply of houses and buying activity and affordability. Hopefully the houses can fall another 20% or at least 15% and then people should start buying.
People already made some money on Dow Jones. It shot up like crazy. Although I cannot see it going past 10,000 points unless we see a clear recovery. So in a year maybe.
RE: Romwo @ 12 –
Sold to you! ;-)
RE: banker @ 7 –
I’m not disagreeing on the necessity to do some bailing out, but rather than setting some conditions down from the get go, money was simply sprinkled upon these incompetents and crooks (who got us here in the first place) like Manna from heaven.
Government does have a tendency to screw things up. I just read an article in the NY Times the other day about the recession of 1920, the recession that nobody has heard of.
It was a short lived recession, and some economists and historians attribute that to the government not getting involved.
It’s not that they wouldn’t have, it’s just that President Woodrow Wilson suffered a major incapacitating stroke, and was then followed by Calvin Coolidge, who almost immediately got caught up in the Teapot Dome Scandal.
RE: banker @ 7 – I don’t think I said it wasn’t needed even if I’m not convinced it was. GS is saying that they didn’t need it and that it cramps their style now when they have spent it all why else would they need a stock offering to pay it back? They are big time arrogant crocks and Paulson’s babies, Lehman on the other hand was reputed to be in Paulson’s bad books since they GS time. I’m convinced It was corrupt, arrogant, unfair, hasty and uncontrolled spending of tax payer money. If it was needed, who knows, it’s not clear. Lehman failure or not the bubble would have bursted.
RE: patient @ 15 – What’s either somewhat amazing, or somewhat encouraging, is that they even think they can do a stock offering.
I think the key is to somehow try to reinflate the bubble again. Because what could happen is this – the real estate in 2010 levels off but the prices will not shoot up like 20% per year anymore. They will get tied to income, rent etc. If this happens – you will not be able to make much money by speculating and you will be ok to own a house in 2010 or 2011 or 2012 or 2020 for that matter.
If people are to make it on real estate – the key is to start a bubble big time. Maybe the money printing could help. Or some Obama signal to everybody to start buying houses.
Do you think that there is a chance of reinflating the real estate bubble or money bubble? Because otherwise you will be able to buy a house anytime you want and make small gains long term but this will not be a path to riches.
RE: Romwo @ 17 –
Many people believe that the government’s overall economic strategy is to inflate our way out of the current real estate downturn. However, for that to work, don’t wages need to start increasing significantly? I don’t see that happening anytime soon. Prices can still increase during a recession / high unemployment, and that’s called stagflation. I’m old enough to remember the stagflation of the 1970’s. It can happen. I remember reading economists explaining the inflation / stagflation as being a result of all of the printing press dollars spent on the Viet Nam war coming back to the U.S. after marauding around the world for awhile. Are we going to see a similar result eventually because of our current adventures in the Middle East?
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For what it’s worth, the linked chart is of recent inflationary trends. I think I see that we just went thru a major deflationary trend. Is it going to turn around now, or is it going to continue?
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Inflation Chart
RE: TJ_98370 @ 18 –
I agree with you. But if the govt wants to keep the status quo – it needs to do massive bailouts. Ok. you can argue it would be more efficient for the economy to let GM go under and get a new company instead of GM that would hire people for lower wages. But the overpriced workers would be pissed! And as a govt you do not want this.
Same thing is that you do not want higher unemployment becuase people are temporarily unhappy.
And then all this stuff about – we need to consume less and export more. This is just pain. What do you tell average Joe – that he cannot buy 3 cars or another Ipod? The average Joe will be pissed.
So the key is somehow to smoke the Chinese and the rest of the world. Hey – you guys send us couple of bills here and there. We will spend it on some goods so your slave labor stays as slave labor. And the average Joe can go on an ever bigger rampage.
The key is really to smoke the world somehow. Maybe we could say that if slave labor agrees to stay as slave labor – we can send them 1 American flag per year and they are free to hang it from their window somewhere in China. What do you think? The key is to start the bubble fast and counteracting current problems by spending even faster than ever and coming up with big deficits and borrow money you can never repay but CAN print in the end. If people are smoked up enough on this scheme – then they will not allow the USD to completely drop altogether by selling the USD in a massive scheme.
Plus the US could tell China. Now we are in it together. We cannot pay and you know it. If you try to sell – we can leak this info to the press and bam – checkmate. The USD you will be selling will be worth nothing. So keep your mouths shut and try to produce for America.
Romwo -
I have news for you, the little caper you describe happened 30 years ago. The rest of the world bought it, up until about 2008. Now that the emperor has no clothes, it will be impossible to go back to what we had before. A new balance will have to be found.
RE: TJ_98370 @ 18 – Wages do not have to increase under the inflate-it-out plan. That would only be necessary if Joe Sixpack were the one paying down the debt.
No, the plan is for Joe Sixpack to welch on his debts and transfer them to the banks. The banks welch on their debts and transfer them to the .gov through bailouts. And then the .gov prints the money to pay the debts back.
Meanwhile the .gov berates the banks to “start lending” in return for all the bailouts. In turn the .gov berates Joe Sixpack to resume borrowing (see: homebuyers credit, etc.). The new lending/borrowing causes the inflation.
forget houses…jobs…day to day grind……..
Cant we all do this for a living?
http://www.youtube.com/watch?v=WtyjNNyYTXc
BTW – Nobody is talking about the fact that China is at fault in this whole mess as well. Why? Well China kept the local currency Juan super low so that the Chinese workers wages cost almost nothing. So employers in the US moved to China. This created huge trade surplass.
So it will be a good thing now if the dollar goes down significantly and Chinese wages start becoming realistic – not $1 per day. Then Chinese workers will also take advantage of the progress and buy new goods and partially stimulate the US economy as well. And average Joe will be the looser here – he will just have to consume less.