Weekend Open Thread (2011-07-29)

Here is your open thread for the weekend beginning Friday July 29th, 2011. 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.

Be sure to also check out the forums, and get your word in the user-driven discussions there!


About The Tim

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.

39 comments:

  1. 1

    I just came across an example of why short sale listings are not evidence of value. A Fannie Mae just sold in my area for $286k. It had been listed as a short sale for about 8 months at $265k or below (250k minimum).

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  2. 2
    Blurtman says:

    Are folks making a bit too much about the rating of US debt?

    “Frankly, the best possible outcome would be for them to downgrade the U.S.—and for the world to shrug, with rates set by the multitude of buyers and sellers. That would at least demonstrate that these emperors, clothed though they are, wear very frayed robes.”

    http://www.thedailybeast.com/articles/2011/07/27/debt-ceiling-unaccountable-credit-ratings-agencies-go-rogue.html

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  3. 3

    RE: Blurtman @ 2 – One reason their might not be that much of a reaction is Europe is in worse shape. They have real financial problems, and not just a bunch of bozos elected to office.

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  4. 4
    Blurtman says:

    RE: Kary L. Krismer @ 3 – Could be. Perhaps the ratings agencies merely provide a justification for action you might take anyway. It is not as if they are competent, after all.

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  5. 5

    RE: Blurtman @ 2
    Yes, these are the same credit rating agencies that were giving subprime mortgages AAA ratings, but do we really want to let our national credit rating get downgraded just to see what would happen? I don’t.
    http://www.frumforum.com/how-to-make-2011-feel-like-1931.

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  6. 6
    Blurtman says:

    RE: Ira Sacharoff @ 5 – Too late. The USA may be in a bit of a corner. Cut spending and further crash the economy? Borrow more without cutting enough and cause a downgrade in the USA’s credit rating?

    I find it telling to hear Obama describe the perils of increasing interest rates via a downgrade – increased costs for borrowers. Of course, Obama misrepresents by not differentiating fixed versus variable rates, and exisiting versus new loans, but that’s what he does. He also seems to think it would be bad to pay savers more.

    Implicit in all of this is Obama’s belief that we should not get in the way of more borrowing.

    Maybe negative savings rates are next? In real terms, we are already there.

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  7. 7
    One Eyed Man says:

    RE: Blurtman @ 6

    Obama pissed me off most when he didn’t endorse the debt commission and propose legislation to follow its recommendations. That was the LEAST that should have been done in my opionion. If you give Obama the benefit of the doubt on that move, the best case scenario is that he was afraid that cutting spending too quickly would hurt the economy. That was the apparent reason for agreeing to extend the tax cuts last year. But as I’ve said on this forum many times, a deficit reduction plan could be structured to reduce spending incrementally over a period of years so as to provide fiscal responsibility and certainty without throwing the economy into recession.

    But he’s at most only half the problem. Perhaps the biggest problem is that nobody wants to take responsibility for actually paying for what we are currently buying much less paying off our existing debt. The T-Party is far more concerned about lower taxes than they are about actually balancing the budget, much less paying off some of the debt. They’d rather strategically default on current government obligations than actually tax people to pay FOR WHAT THEY (conservatives and liberals) ALREADY SPENT.

    The would-be T-Party is a fraud. The real Tea Party was over Taxation WITHOUT REPRESENTATION. The would-be T-Pary is against taxation to pay for what they and the rest of us, THROUGH OUR ELECTED REPRESENTATIVES already spent. The cliche liberals may have been tax and spend, but the cliche conservatives merely changed that to borrow and spend by selling the country on the myth of a balanced budget thru supply side tax cuts that primarily benefited the wealthy without ever truly decreasing spending.

    Last week, in response to a question from me as to what the terms of Cut, Cap and Balance really were, Scotsman stated that the Cut, Cap and Balance Plan would cap spending at about the historic average of the last 50 years of about 19% to 20% of GDP. I have no problem with cutting from our current 24% spending rate to the long term average. I also have no problem with generally having that 20% spending cut spread equally among all programs (subject to some exceptions). But our current federal revenues are running at about 2.2 Trillion which is closer to 15% of GDP. At that rate, you can’t even balance the budget, much less pay off any of the principal on the existing debt without agreeing to Increase Revenue.

    And don’t give me that “rich people won’t invest if taxes are higher” crap. History probably doesn’t bear that out. I’m pretty sure peopel still invested in the 1950’s. International competition probably requires that we move to a consumption based tax system (a sales tax). But a few percent increase in rich peoples income taxes isn’t going to cause an exodus to other countries or an unwillingness to invest. There might be a very small marginal affect on peoples willingness to invest but investors are far more worried about whether they will have any ROI rather than if the government takes another 1/20th of the actual ROI as a tax increase.

    The idea that capital will dry up if taxes on the rich are increased by 5% is “the big lie” that the T-Party is either too dumb to understand or too gullible to see through. The irony is that most T-Party members like Joe the Plumber, and pre-book sales Palin, aren’t even smart enough to know that. If I believed in a “god” I’d ask her for help, but unfortunately its probably up to congress and I don’t think many of us would describe them as a heavenly body.

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  8. 8
    Scotsman says:

    RE: One Eyed Man @ 7

    When the economy was “healthy” the current tax structure provided more than enough revenue to fund government at 20% of GDP. Of course the economy wasn’t really healthy- it was on a three decade debt fueled bender, but that’s beside the point. If we can get things moving again (not the .4% growth of the first quarter), get out of being the world’s policeman, and cut back entitlements we’ll be OK. Or so many think.

    But of course we won’t do that- we can’t even get the parties to agree to a hundred billion in cuts, let alone the trillion that’s needed. And taxes won’t be going up as long as the banks and the rich control the government so we’re left with the one eventual outcome- some sort of default. It probably won’t happen for a couple more years, but “default” we will- not on the debt or interest payments (remember who runs things?), but on the entitlement programs people like David are counting on. We’re on a run away train, headed for the cliffs.

    Suck it up. Spend less, save more. Rely on yourself.

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  9. 9
    Blurtman says:

    RE: One Eyed Man @ 7 – Don’t discount the reactionary lizard brain, which last loomed large in the run up to the Iraq war.

    I fear that either no one knows the right ingredients to foster job growth, or perhaps realize that the inescapable solution is USA-China wage parity.

    We are really getting trapped in man made conventions, which can be quite deadly.

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  10. 10
    Blurtman says:

    RE: Scotsman @ 8 – No one gives up empire willingly.

    Personally, I am waiting for 5% 10 year treasuries.

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  11. 11
    Pegasus says:

    By Blurtman @ 10:

    RE: Scotsman @ 8 – No one gives up empire willingly.

    Personally, I am waiting for 5% 10 year treasuries.

    The bond market has been telling you that isn’t going to happen any time soon. Those 10 year treasuries have been rallying for months with a 2.80 yield today.

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  12. 12
    Scotsman says:

    RE: Blurtman @ 9

    ” the inescapable solution is USA-China wage parity.”

    Ouch! Yeah, but. . . .

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  13. 13
    David Losh says:

    RE: One Eyed Man @ 7RE: Scotsman @ 8

    Let’s throw the two of you together, because you really don’t understand. I have never for a second believed Social Security would be there when I retired. When I was a teen ager, paying taxes, including Social Security, or when I have had employees that paid into the system of Social Security, I never for a second thought that I was doing anything but sending money into a black hole.

    What I am saying is that the American people have paid a lot of money into these “entitlements.” The second the government starts defaulting on Social Security, or MediCare, is the day the country revolts.

    I don’t care about bond holders, or foreign investors, nobody does. What we care about is our money, our money, money we gave to our government for “safe” keeping, and investment in our future retirement.

    So the stinking Republicans had better come up with our money, and cut the heck out of all the fat they have put into the budgets over the past thirty years. Let’s start with the Reagan weapons programs that were a good idea at the time, but foolish now. Let’s cut the heck out of military spending and really take care of the people we put into harms way to protect corporate investment over seas. Let’s taxes the heck out of every corporation that has decimated our economy.

    In other words, unless you have a plan that balances the budget, and generates jobs in the process then go home, get out of the way, and let real politicians get on with the business of this country.

    Boehner should be tried for treason.

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  14. 14
    Scotsman says:

    Heh.

    http://cuial.com/debt.jpg

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  15. 15
    pdmseatac says:

    By Blurtman @ 6:

    RE: Ira Sacharoff @ 5 – “Too late. The USA may be in a bit of a corner. Cut spending and further crash the economy? Borrow more without cutting enough and cause a downgrade in the USA’s credit rating?”

    Crash what economy ? The economy of the US is based on nothing but house-flipping, government handouts, and debt. It’s going to crash soon enough no matter how many bales of newly minted dollars are dropped from the helicopters. It’s time to start the process; hopefully something better will emerge from the wreckage.

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  16. 16
    Blurtman says:

    RE: David Losh @ 13 – It is conceviable that the USG continues to extend the age at which SS retirement benefits will be paid, in order ot lessen the draw on the USG budget. I believe in this case, the SS trust fund itself would be defaulting on benefits to the recipients, but because it lent money to a deadbeat, the USG. One solution might be to sever the SS trust fund from the USG, and seek equivalent status for its bonds that treasury bondholders seem to have. It is up to the recipents of SS to get riled up about this. Unfortunately, future recipients have already thrown in the towel, believing that they will receive no benefits. This is an odd position considering he paltry savings of the avergae American,

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  17. 17

    RE: pdmseatac @ 15 – Something better would be having politicians elected based on their actually knowing and understanding things, as opposed to simply having good hair!

    Washington voters perhaps aren’t so bad at that in that we elected Dixie Lee Ray and Mike Lowry. On the other hand, we’ve also elected Maria Cantwell several times.

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  18. 18

    RE: Blurtman @ 16 – But they have the lottery to rely on! ;-)

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  19. 19

    RE: Kary L. Krismer @ 17
    Ha! Dixie Lee Ray and Mike Lowry certainly weren’t elected based on their good hair or their good looks( Lowry looked like a basset hound, and Dixie like a linebacker crossed with a toad?), and I’m not sure why Dixie got elected in the first place, but neither of them were especially good at their jobs, and neither lasted more than one term.
    So: We’ll elect them to the governorship if they’re ugly, but won’t re-elect them.

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  20. 20

    RE: Ira Sacharoff @ 19 – I was too busy with college to remember specifics of what DLR did as governor. I don’t remember Lowry being all that bad, nor would I really judge based on whether they were re-elected.

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  21. 21
    Scotsman says:

    RE: Ira Sacharoff @ 19

    “I’m not sure why Dixie got elected in the first place,”

    She was brilliant, a nuclear scientist as I recall- the proverbial “rocket scientist.” Kinda like Obama went to Harvard Law, so he has to be brilliant. We now know how both worked out.

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  22. 22
    pfft says:

    By Scotsman @ 21:

    RE: Ira Sacharoff @ 19

    “Iâ��m not sure why Dixie got elected in the first place,”

    She was brilliant, a nuclear scientist as I recall- the proverbial “rocket scientist.” Kinda like Obama went to Harvard Law, so he has to be brilliant. We now know how both worked out.

    yeah, he’s going to get re-elected. enjoy!

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  23. 23
    pfft says:

    One year later Scotsman your doom scenario has failed to play out.

    The U.S. Is Not Drowning In Debt
    http://moneyland.time.com/2011/07/15/the-u-s-is-not-drowning-in-debt/?hpt=hp_t2

    the amount the U.S. government pays to service its debt is, relative to the size of the economy, less than it was paying throughout the boom years of the 1980s and 1990s and for most of the last decade. The Congressional Budget Office estimates that net interest on the debt (which is what the government pays to service it) would be $225 billion for fiscal year 2011. The latest figures put that a bit higher, so let’s call it $250 billion. That’s about 1.6% of American output, which is lower than at any point since the 1970s – except for 2003 through 2005, when it was closer to 1.4%.

    Our national debt will not bankrupt us. It hasn’t been this low in 40 years! it’s half of the highest it’s been in the last 30 years!

    the math just isn’t there. our interest payments will not burden the economy. it’s at 40-year lows!

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  24. 24
    Brat says:

    Has anyone seen a rash of offers in the last couple weeks? I wonder if lookers are now buyers because of the risk of increasing interest rates…

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  25. 25
    Pegasus says:

    By Brat @ 24:

    Has anyone seen a rash of offers in the last couple weeks? I wonder if lookers are now buyers because of the risk of increasing interest rates…

    There is always some reason as to why you are about to be “priced out forever” if you don’t buy today!

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  26. 26
    David Losh says:

    RE: Scotsman @ 21

    She was a woman marine biologist. It looked as though she was a liberal choice for Governor over John Spellman. She also had the endorsement of Magnuson, and Scoop Jackson.

    Her fascination with nuclear energy was swept aside because she also opposed fossil fuels.

    We now see she was seriously mentally disturbed, yet proclaimed conservatives still champion her as proof of being open minded.

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  27. 27
    Bingo says:

    RE: Brat @ 24

    I’ve noticed that also. Since rates are dropping I doubt that’s the reason. I think it is due to being the “selling season”.

    Incidentally, I’ve noted some actual move-up buyers. They’re apparently taking their loss on their current abode, and, taking advantage of someone’s higher dollar loss on more expensive property. If there is to be any improvement in the market there needs to be move-up buyers, not just investors doing one-time buying and banks doing one-time selling.

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  28. 28

    RE: David Losh @ 26
    Dixy Lee Ray was actually defeated in the next primary election( 1980) by Jim McDermott, who was then defeated by Spellman. It wasn’t too much longer before McDermott became Congressman for Life.
    Had Dixy been able to fend off McDermott in the primary and face Spellman in 1980, she still would have lost, since at that point she appeared to most people to be a raving lunatic.
    And by today’s standards, Spellman would be considered fairly liberal, and Dixy certainly was not, so there would have been a fair number of people who voted for her in ’76, but couldn’t bring themselves to in ’80.

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  29. 29
    Pegasus says:

    RE: Ira Sacharoff @ 28 – I think the thing that really wrecked her chances for re-election was when the public found out about her being a real party animal. It became too much for voters to visualize.

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  30. 30
    David Losh says:

    RE: Pegasus @ 29

    Do you mean the dogs who followed her everywhere?

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  31. 31
    Pegasus says:

    By David Losh @ 30:

    RE: Pegasus @ 29

    Do you mean the dogs who followed her everywhere?

    Forgot about those.

    “On March 8, 1974, the Seattle-King County Association of Realtors presented Dixy Lee Ray with the First Citizen of 1973 award at a banquet at the Olympic Hotel.”

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  32. 32
    pfft says:

    By pfft @ 23:

    One year later Scotsman your doom scenario has failed to play out.

    The U.S. Is Not Drowning In Debt
    http://moneyland.time.com/2011/07/15/the-u-s-is-not-drowning-in-debt/?hpt=hp_t2

    the amount the U.S. government pays to service its debt is, relative to the size of the economy, less than it was paying throughout the boom years of the 1980s and 1990s and for most of the last decade. The Congressional Budget Office estimates that net interest on the debt (which is what the government pays to service it) would be $225 billion for fiscal year 2011. The latest figures put that a bit higher, so let�s call it $250 billion. That�s about 1.6% of American output, which is lower than at any point since the 1970s � except for 2003 through 2005, when it was closer to 1.4%.

    Our national debt will not bankrupt us. It hasn’t been this low in 40 years! it’s half of the highest it’s been in the last 30 years!

    the math just isn’t there. our interest payments will not burden the economy. it’s at 40-year lows!

    waiting for scotman’s reply…

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  33. 33
    David Losh says:

    RE: Pegasus @ 31

    Oh yeah!

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  34. 34
    Blurtman says:

    RE: pfft @ 32 – Glad to hear that you agree with me that there is more than sufficient money even without addditonal borrowing to service the debt! Keep up the research. You are beginning to understand. ;>)

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  35. 35
    ricklind says:

    RE: Blurtman @ 34
    Have read a couple of things in passing on Google news about there being no such thing, really, as a debt limit, per the 14th amendment which states essentially that all debts will be honored. I haven’t yet researched where and when (Reagan administration??) the debt “limit” originated but the key concept is that is a recent invention.

    I do think it is a good thing to limit debt, both personally and federally, but the idea of a legal limit seems to be a more modern institution than an older, structural part of government.

    Much of this shibuki theatre seems more oriented towards appeasing investment banks rather than serving the will of the people. Nothing new there. It seems that if we default then bad things happen, and if we raise the debt limit on our national credit card, and keep paying with the card, then we delay the next bad thing.

    Iceland defaulted and while day to day life there continues, they have so much still unwound debt that they have not seen the bottom either.

    Either way we roll, I do not think we have seen the bottom yet.

    Best,

    Rick

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  36. 36
    Scotsman says:

    RE: pfft @ 32

    You’re an idiot who, apparently, doesn’t even understand the difference between nominal debt and the cost (interest) to service it, and freely interchanges the two issues when attempting to formulate an argument. Given that as a starting point, why waste my time?

    Oh- and my doom scenario? The one you agreed had come to pass? Let’s see- growth has slowed to a crawl as we head back into recession, unemployment is rising, the total percentage of the population that is employed is down, people’s expectations for the future are at record lows, retail sales have fallen, inventories are up, incomes are flat, did I miss anything? Oh yeah- home prices continue to fall YOY wiping out ever more wealth. Sounds like recovery summer (again) to me.

    And did I mention Obama just got his butt whipped by the tea party who won spending concessions, a hold on any tax increases, forced across the board cuts as the only alternative to comission directed cuts, and a vote on a balanced budget amendment. True, they lost on the debt llimit increase, but what’s another 10% of GDP in resource sucking debt?

    If you weren’t wrong all the time- you’d be right. I suggest more Rush Limbaugh, at least 2 hours a day. And since Krugman will probably be having a heart attack soon you’ll need a new hero. This time, pick right!

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  37. 37

    By ricklind @ 35:

    RE: Blurtman @ 34
    Have read a couple of things in passing on Google news about there being no such thing, really, as a debt limit, per the 14th amendment which states essentially that all debts will be honored.

    I don’t think that goes at all to the new debt issue, but just payment of existing debt. And then you get into the issue of what is debt. If it doesn’t include spending on things like SS, Medicaid, Medicare, the military, etc., then even if that theory is valid (questionable), it wouldn’t get you to anywhere different than what’s been said without such a theory. There’s always been enough revenue to pay for existing debt.

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  38. 38
    Scotsman says:

    RE: pfft @ 32

    See, I told you- Krugman is going nuts. How can you deny we’re experiencing disaster when your own leader says we’re in recession and quickly headed for “bannanna republic” status?

    http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?_r=1&partner=rssnyt&emc=rss

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  39. 39
    ricklind says:

    RE: Kary L. Krismer @ 37
    I am thinking we agree here. Payment for entitlements has to be part of the equation by current definition.

    It seems that paying for existing debt is like making the minimum payment on the credit card. Keeps me indebted.

    It is all probably moot, since the debt limit has been raised as we speak. (No surprise, kinda like the NFL, nothing worth negotiating until the 11th hour, then all is well and everybody smiles.)

    But the 14th amendment addresses (among several other things) all debt taken on by the US Gov., and therein lies the rub. It does not distinguish between foreign and domestic debt, on my second blush reading. Doesn’t say who incurred the debt, except the US government, or to whom incurred, domestic or non domestic, But it will be paid. So says the constitution. Sticky stuff.

    I am hereby way over my depth and I would offer more if I could, I mostly just try to match macro economics with micro (Seattle) economics and figure out if I should ever again buy a house, or condo.

    Personally, I think the oligarchy is in charge, and makes the rules, and we see some infighting. Big deal. The “settling” of this economic downturn will be bitter and painful for us peons.

    FWIW, these are the useful, and painful, conversations to have.

    Best,

    Rick

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