Weekly Open Thread (2014-05-26)

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Here is your open thread for the week of May 26th, 2014. 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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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.

75 comments:

  1. 1

    A Meelee Mouth National News Article

    “…So far, the housing takeoff has simply not taken off. Prices are rising, but new home construction remains well below pre-crisis levels and has disappointed forecasters so far this year….”

    http://www.thestreet.com/story/12721306/1/inflation-heating-up-fed-should-raise-interest-rates-soon.html?puc=yahoo&cm_ven=YAHOO

    So this and stagnant incomes is a reason to raise interest rates soon? They use to call this economics, I call it “shooting from the hip”. If the truth be known, maybe a good guess is interest rates must go up so stocks can be sold? Read the article above, and explain it to SWE in clear English…LOL.

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  2. 2

    RE: softwarengineer @ 1 – Why would we want new home construction to be at pre-crisis levels? Are we trying to create a new crisis?

    Oh, that’s Cramer’s site. No wonder it’s spouting such nonsense.

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  3. 3

    RE: Kary L. Krismer @ 2

    The Scary Part Kary

    When it doesn’t make sense, it seems to portend it happenning anyway. No wonder guys like Warren Buffet can’t call the market right either….LOL

    I saw on the H2 Channel last night “America’s Book of Secrets” that American billionaires have a secret agenda and really run this country in a shadow form. Perhaps, since they also control the media, they confuse us with irrelevent “Cramer” news and do whatever they wanted anyway….shadow government.

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  4. 4
    Blurtman says:

    RE: softwarengineer @ 1 – I guess the timing move might be to rotate out of equities and into bonds, and only into bonds after the dust settles. But this market is totally artificial. The Fed holds more Treasuries than even China! The US financial system is an absolute joke; there is no there there. The only thing propping it up is vested interests and a fear of what the alternative is.

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  5. 5

    RE: Blurtman @ 4 – What’s interesting is mortgage rates have been dropping again. I haven’t looked into the reason, but with the tapering I wasn’t expecting that.

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  6. 6

    SKCAR has a 4 hour clock hour (a/k/a continuing education) course on how to remove household odors. I almost want to take that just to see how they possibly stretched that into a four hour course.

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  7. 7
    Blurtman says:

    RE: Kary L. Krismer @ 5 – What tapering? I believe mortgage rates are tied to the 10 year, no? Is 10 year demand dropping? Apparently not. Is 30 year demand dropping? Apparently not. How are the rates/prices set? Institutional buyers, the same gang of criminals who crashed the economy and who were bailed out and are bailed out with digital dollars conjured out of thin air. And the Fed is a huge buyer, and so we pay the criminal banks to bid on Treasuries that are then sold to the Fed. The whole system is an absolute joke.

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  8. 8
    Blurtman says:

    RE: Kary L. Krismer @ 6 – Takes a while to ask the over staying relatives to leave. ;>}

    Rate this comment: Thumb up 0

  9. 9

    RE: Blurtman @ 7 – Tapering is the Fed cutting back on its buying spree.

    Rate this comment: Thumb up 0

  10. 10
    Blurtman says:

    RE: Kary L. Krismer @ 9 – China and Russia apparently are selling. The Fed is continuing to buy, but at a slower rate we are told. But “Belgium” has apparently picked up the slack. The might duchy of Belgium. Sure…….

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  11. 11
    Blurtman says:

    Why the USA is a great country! How much did this fellow contribute to the Obama campaign?

    “This marble-floored duplex in the Upper East Side’s The Seville was purchased in 2005 for $6.2 million by former MortgageIT CEO Doug Naidus. That was a year before the company was acquired by Deutsche Bank, and a few years before Deutsche Bank would be sued by the Department of Justice for MortgageIT’s misrepresenting the quality of more than $5 billion government mortgages, filing false claims on more than $1 billion worth of government mortgages, and defrauding U.S. taxpayers. They were forced to hand over $202 million. But on the bright side, Naidus ended up with this very fancy apartment, which he would now like to sell for $11.25 million. He previously put the 4,254-square-foot 6BR/4.5BA on the market in 2008 for $10.95 million and allowed the price to be chopped down to $7.9 million before pulling the listing. The $8,410 in monthly costs aren’t going to make this one an easy sell.”

    http://ny.curbed.com/tags/doug-naidus

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  12. 12
    Blake says:

    By Blurtman @ 10:

    RE: Kary L. Krismer @ 9 – China and Russia apparently are selling. The Fed is continuing to buy, but at a slower rate we are told. But “Belgium” has apparently picked up the slack. The might duchy of Belgium. Sure…….

    Yes, looks like Belgium is mortgaging it’s whole country to buy US Treasuries…
    http://www.paulcraigroberts.org/2014/05/20/belgium-treasury-purchase/
    … or the Fed is not tapering and secretly doing swaps with the Belgian Central Bank?
    Q-infinity… the patient remains on life support and may never be taken off! Zombie economy, status quo ante, never fail…
    The Untouchables: http://www.pbs.org/wgbh/pages/frontline/untouchables/

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  13. 13
  14. 14
    pfft says:

    By Kary L. Krismer @ 2:

    RE: softwarengineer @ 1 – Why would we want new home construction to be at pre-crisis levels? Are we trying to create a new crisis?

    Oh, that’s Cramer’s site. No wonder it’s spouting such nonsense.

    if price to income ratios are solid and so are lending standards it would be a good thing.

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  15. 15

    RE: pfft @ 14 – Not necessarily. The time from identifying a property to being able to build on it is so long that builders tend to overbuild, because too many get the same idea at the same time. When they build they may discover too many of them did the same thing and you end up with an oversupply.

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  16. 16
    pfft says:

    The gun nuts make themselves look stupid in Texas of all places.

    Gun Activists Flaunting Assault Rifles Get Booted From Chili’s and Sonic
    As a backlash grows, open-carry groups in Texas beat a retreat.

    http://www.motherjones.com/politics/2014/05/guns-open-carry-chilis-sonic-videos

    Rate this comment: Thumb up 0

  17. 17

    RE: Blurtman @ 4
    Yes Blurtman

    As bad as equities are; its that only band playing today. Gold, zero interest savings and real estate are understandably drawing no mass investors. IMO, that’s propping up stocks too, the rich have no where to put their riches. Even stocks are like Las Vegas.

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  18. 18

    RE: Blurtman @ 7

    Yes Blurtman

    They get the money for like 0% and lend it out for 3-6%…..its all profit for the banksters.

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  19. 19

    RE: Blake @ 12

    Interesting You Mentioned an IMF Issue

    I saw on channel H2’s “America’s Book of Secrets” that Chase Bank and the Federal Reserve share gold to show their customers its still there in a secret tunnel that connects the two NY sky scrapers…..most of its missing is the allegation….LOL

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  20. 20

    This is a good example of the press not having a clue. This news person thinks that employers like tight labor markets.

    “Jeannie Kim, owner of Sam’s Diner in the up-and-coming Mid-Market area, has a problem plenty of employers outside San Francisco would love to have.

    She’s got jobs but nobody to fill them.”

    http://www.sfgate.com/default/article/S-F-s-new-job-problem-Everyone-s-working-5508184.php

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  21. 21
    pfft says:

    By softwarengineer @ 17:

    RE: Blurtman @ 4
    Yes Blurtman

    As bad as equities are; its that only band playing today. Gold, zero interest savings and real estate are understandably drawing no mass investors. IMO, that’s propping up stocks too, the rich have no where to put their riches. Even stocks are like Las Vegas.

    the expected returns of stocks are pretty good and just about everything you mentioned has some role in a portfolio. bonds cushion your portfolio when stocks fall.

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  22. 22
    Blurtman says:

    RE: softwarengineer @ 18 – Why can’t we all be in on that game?

    Rate this comment: Thumb up 0

  23. 23

    RE: pfft @ 16

    How About All the MASS Guns

    Obama/Holder gave to the Mexican Drug Cartel?

    Rate this comment: Thumb up 0

  24. 24

    RE: Kary L. Krismer @ 20

    More Cramer News Hogwash from the Shadow Government Billionaires?

    http://www.bls.gov/eag/eag.ca_sanfrancisco_msa.htm

    The San Francisco area lost 15,000 jobs since last November.

    Its total labor force has been flat about the last couple years….interesting too, the total labor force for the San Francisco area is about the same as the Seattle area, around 2 million.

    http://data.bls.gov/timeseries/LAUMT064186000000006?data_tool=XGtable

    Both farm and non-farm total employment recent deterioration occurred too….they need to legalize pot to gain farm labor jobs….LOL

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  25. 25

    RE: Blurtman @ 22

    We Aren’t On the Santa Claus Billionaire “Good Kid” List…

    Rate this comment: Thumb up 0

  26. 26
    Blake says:

    By softwarengineer @ 17:

    RE: Blurtman @ 4
    Yes Blurtman

    As bad as equities are; its that only band playing today. Gold, zero interest savings and real estate are understandably drawing no mass investors. IMO, that’s propping up stocks too, the rich have no where to put their riches. Even stocks are like Las Vegas.

    Really big money moving into bonds today driving the 10 year rates way down, below 2.5%… 2.43% last I saw (a 3%+ run up in 10 year note prices)…

    Stock market is hitting new highs on less volume and Corps are borrowing money like crazy to buy their own stocks…. hmmm… Keep on dancing til the music stops I guess? I think the fat lady is in the wings warming up for her number…
    http://davidstockmanscontracorner.com/whats-propping-up-the-market-behold-the-corporate-stock-buyback-ponzi-and-nearly-all-borrowed/
    -snip- “the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter! Should the Q1 pace of buybacks persist into Q2 which has just one month left before it too enters the history books, the LTM period as of June 30, 2014 will be the greatest annual buyback tally in market history. And now for the twist. Unlike traditional investors who at least pretend to try to buy low and sell high, companies, who are simply buying back their own stock to reduce their outstanding stock float, have virtually zero cost considerations: if the corner office knows sales and Net Income (not EPS) will be weak in the quarter, they will tell their favorite broker to purchase $X billion of their shares with no regard for price: the only prerogative is to reduce the amount of shares outstanding and make the S in EPS lower, thus boosting the overall fraction in order to beat estimates for one more quarter.”
    Hey!! the EPS is looking GREAT!

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  27. 27
    Blake says:

    By softwarengineer @ 24:

    RE: Kary L. Krismer @ 20

    More Cramer News Hogwash from the Shadow Government Billionaires?

    http://www.bls.gov/eag/eag.ca_sanfrancisco_msa.htm

    The San Francisco area lost 15,000 jobs since last November.

    Its total labor force has been flat about the last couple years….interesting too, the total labor force for the San Francisco area is about the same as the Seattle area, around 2 million.

    http://data.bls.gov/timeseries/LAUMT064186000000006?data_tool=XGtable

    Both farm and non-farm total employment recent deterioration occurred too….they need to legalize pot to gain farm labor jobs….LOL

    Interesting… I wonder how many people living in the San Fran area (or Seattle) are part of the “rentier” class that do not work, but make money off investments, rent and such? I read last year that the top 1% in New York make 40% of the income in the city… most of them do not “work.” Perhaps they should hire more help? Aren’t they the job creators?

    Me thinks this new economy is not really so new, but more like the late 19th century… or those medieval times. Those were the days eh? Kings, queens… peasants.

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  28. 28
    Blurtman says:

    What an absolute dumb arse!

    “You know, a lot of people say, this is just helping rich people. But it’s not true. Our policy is aimed at holding down long-term interest rates, which supports the recovery by encouraging spending. And part of it comes through higher house and stock prices, which causes people with homes and stocks to spend more, which causes jobs to be created throughout the economy and income to go up throughout the economy.” Janet Yellen, the newly appointed head of the Federal Reserve defending its quantitative easing program.

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  29. 29
    pfft says:

    By Blurtman @ 28:

    What an absolute dumb arse!

    sorry it’s easily defensible by academic research. the wealth effect of rising stock prices and rising home prices is well known. lower interests rates do make it easier to borrow.

    low interest rates are not just the Fed. We have an oversupply of savings because people are saving instead of borrowing. Rising rates is supposed to HELP?

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  30. 30
    Blurtman says:

    RE: pfft @ 29 – “…holding down long-term interest rates, which supports the recovery by encouraging spending.” Please show me the real world data, not some hypothetical graphs in an econ/sociology text book.

    “And part of it comes through higher house and stock prices, which causes people with homes and stocks to spend more, which causes jobs to be created throughout the economy and income to go up throughout the economy.”

    Any idea of what percentage of Americans own stock and enough stock to exhibit this behavior?

    “But new data from Pew Research suggests that more than half (53 percent) of Americans have absolutely no money in the stock market, including retirement accounts. This reality is often overlooked when people make judgements about the relative health of the economy and what that means for Main Street. The recent stock market highs have not been affecting everybody.”

    Read more: http://wallstcheatsheet.com/stocks/how-many-americans-even-own-stocks.html/?a=viewall#ixzz333S3LTqU

    And is Daffy Duck suggesting that as incomes are flat, that folks who own houses and stocks dip into the ephemeral wealth of equity to fuel consumption? Gee, how might that end?

    Not addressed by Daffy Duck:

    – The most vulnerable being impoverished by the low savings and UST rates.

    – The absolute silence on the effects of a lack of faith and trust in a financial system where fraud goes unpunished, nay, rewarded, and therefore, where the next greed and fraud fueled crash can be right around the corner. That must make a good deal of potential investors fork over their last dollar to invest in this market. Not.

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  31. 31
    Blake says:

    Wow… I cannot believe Yellen said that BS… oiii.
    “Wealth effect” = 4 cents on the dollar… Please sir, may I have some more?
    http://davidstockmanscontracorner.com/janet-heading-down-for-everyone-else/
    -snip- Once upon a time even mainstream economists understood that the secret to sustainable economic growth and real wealth generation is investment in new productive assets, not the inflation of existing financial paper and its derivatives and re-hypothecations. But we are now so deep in the Keynesian ukase proclaimed by the self-perpetuating academics and monetary policy apparatchiks which control the Federal Reserve System, that we have reached this strange pass: Namely, that even by their own dim Keynesian lights, the Bernanke/Yellen cabal claims that $1 of wealth pumping translates into only 4 cents of added consumer spending!

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  32. 32
    pfft says:

    By Blurtman @ 30:

    RE: pfft @ 29 – “…holding down long-term interest rates, which supports the recovery by encouraging spending.” Please show me the real world data, not some hypothetical graphs in an econ/sociology text book.

    “And part of it comes through higher house and stock prices, which causes people with homes and stocks to spend more, which causes jobs to be created throughout the economy and income to go up throughout the economy.”

    Any idea of what percentage of Americans own stock and enough stock to exhibit this behavior?

    “But new data from Pew Research suggests that more than half (53 percent) of Americans have absolutely no money in the stock market, including retirement accounts. This reality is often overlooked when people make judgements about the relative health of the economy and what that means for Main Street. The recent stock market highs have not been affecting everybody.”

    Read more: http://wallstcheatsheet.com/stocks/how-many-americans-even-own-stocks.html/?a=viewall#ixzz333S3LTqU

    And is Daffy Duck suggesting that as incomes are flat, that folks who own houses and stocks dip into the ephemeral wealth of equity to fuel consumption? Gee, how might that end?

    Not addressed by Daffy Duck:

    – The most vulnerable being impoverished by the low savings and UST rates.

    – The absolute silence on the effects of a lack of faith and trust in a financial system where fraud goes unpunished, nay, rewarded, and therefore, where the next greed and fraud fueled crash can be right around the corner. That must make a good deal of potential investors fork over their last dollar to invest in this market. Not.

    “”But new data from Pew Research suggests that more than half (53 percent) of Americans have absolutely no money in the stock market,”

    it’s still half.

    the wealth effect isn’t just about stocks and homes, it’s about the effect on the entire economy. even if you don’t own stocks or a house.

    “holding down long-term interest rates, which supports the recovery by encouraging spending.” Please show me the real world data, not some hypothetical graphs in an econ/sociology text book.”

    seriously? I have to explain to you that higher rates are not good?

    “Not addressed by Daffy Duck:

    “- The most vulnerable being impoverished by the low savings and UST rates.”

    any idea of what number of people are impoverished by low interest rates from their savings? two can play that game. You don’t even have to google. most poor people get a majority of their income from SS. Most people have their money tied up in their homes and not allowing home prices to collapse is a good thing.

    “And is Daffy Duck suggesting that as incomes are flat”

    incomes are not flat.

    Recap:

    the wealth effect is real. most people get a majority of their income from SS and it’s ludicrous to think that higher rates would help the economy.

    “The absolute silence on the effects of a lack of faith and trust in a financial system where fraud goes unpunished, nay, rewarded, and therefore, where the next greed and fraud fueled crash can be right around the corner. That must make a good deal of potential investors fork over their last dollar to invest in this market. Not.”

    and yet the market has soared off the bottom reached in 2009. kind of puts your theory to rest huh?

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  33. 33
    wreckingbull says:

    RE: pfft @ 32 – If there was any doubt before, there is none now. You are a cruel one-percenter. Let them eat cat food. Wow.

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  34. 34
    pfft says:

    By Blake @ 31:

    Wow… I cannot believe Yellen said that BS… oiii.
    “Wealth effect” = 4 cents on the dollar… Please sir, may I have some more?
    http://davidstockmanscontracorner.com/janet-heading-down-for-everyone-else/
    -snip- Once upon a time even mainstream economists understood that the secret to sustainable economic growth and real wealth generation is investment in new productive assets, not the inflation of existing financial paper and its derivatives and re-hypothecations. But we are now so deep in the Keynesian ukase proclaimed by the self-perpetuating academics and monetary policy apparatchiks which control the Federal Reserve System, that we have reached this strange pass: Namely, that even by their own dim Keynesian lights, the Bernanke/Yellen cabal claims that $1 of wealth pumping translates into only 4 cents of added consumer spending!

    david stockman, LOL.

    absolute nonsense. the effect of rising stock and home prices is as real as the effect of falling stocks and home prices. I doubt anyone would have a problem with saying collapsing stock and home prices is a drag on the economy. rising stock and home prices therefore must have the reverse effect.

    “Namely, that even by their own dim Keynesian lights, the Bernanke/Yellen cabal claims that $1 of wealth pumping translates into only 4 cents of added consumer spending!”

    I have no idea what this actually means. it has nothing to do with keynes. maybe mr stockman means QE? Stimulus research so a big positive effect of stimulus spending during a downturn.

    “Once upon a time even mainstream economists understood that the secret to sustainable economic growth and real wealth generation is investment in new productive assets”

    ummmm, wow. I don’t even really know where to start with this one. We just are coming out of downturn where we had too many productive assets. There really is no point to that statement. the Fed has been trying to do just about all it can to stimulate consumer spending to soak up all the overcapacity(too many productive assets) in the economy. too little capacity isn’t our current problem. if so there would be inflation and wage pressures. to illustrate how stupid that statement is. was the problem during the depression that there was too little capacity and too much demand?

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  35. 35
    pfft says:

    By wreckingbull @ 33:

    RE: pfft @ 32 – If there was any doubt before, there is none now. You are a cruel one-percenter. Let them eat cat food. Wow.

    LOL. it’s the truth.

    “Let them eat cat food.”

    LOL. of all the people on this board I am the most progressive. I want universal heathcare instead of Obamacare. I want free college for everyone. I want higher SS payments and a stronger social safety net. But yeah let them eat catfood. LOL.

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  36. 36
    wreckingbull says:

    RE: pfft @ 35 – ZIRP is very cruel to those who are most vulnerable. The fact that you don’t understand that says quite a bit, regardless of who you purport to be.

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  37. 37
    Blurtman says:

    RE: pfft @ 32 – OK, so you cannot supply a link of real historical data backing up Yellen’s ignorant statements.

    Well here is another real data point for you, deflating once again your baseless point of view.

    “According to the Federal Reserve’s most recent report, the median value of directly held stock in 2009, for families holding any, was approximately $12,000.”

    http://www.brighthub.com/money/investing/articles/117044.aspx

    Yesirreee, that rising stock market will certainly make those $12,000′ ers spend like mad.

    Yellen is a dumb arse.

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  38. 38
    whatsmyname says:

    RE: Blake @ 31 – Oftentimes, you make good points. I frequently agree with you, but David Stockman? Supply side pimp, and former Blackstone partner? Here is his defining moment:

    “Stockman’s influence within the Reagan Administration decreased after the Atlantic Monthly magazine published the infamous 18,246 word article, “The Education of David Stockman”, in its December 1981 issue, based on lengthy interviews Stockman gave to reporter William Greider. The White House’s public relations team thereafter attempted to limit the article’s damage to Reagan’s perceived fiscal-leadership skills. Stockman was quoted as referring to Reagan’s tax act as: “I mean, Kemp-Roth [Reagan’s 1981 tax cut] was always a Trojan horse to bring down the top rate…. It’s kind of hard to sell ‘trickle down.’ So the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.” Of the budget process during his first year on the job, Stockman was quoted as saying: “None of us really understands what’s going on with all these numbers,” which was used as the subtitle of the article.”

    Supply side economics and low taxes for the top are a big part of why we are re-living the gilded age.

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  39. 39
    pfft says:

    By wreckingbull @ 36:

    RE: pfft @ 35 – ZIRP is very cruel to those who are most vulnerable. The fact that you don’t understand that says quite a bit, regardless of who you purport to be.

    no. it means I know that the poor don’t receive a lot of interest income…because they are poor! isn’t that self evident? just how much money do you think the poor have if they even have a bank account at all. higher interest rates would put the poor out of work. that would probably all their income. just about all liberal economists agree with ZIRP. do they not like the poor?

    after the poor retirees don’t have a lot of interest income, certainly not the one’s with no money. most of their income is from SS.

    the poor need jobs not 4% interest rates on savings they don’t have because they are poor.

    recap:

    the poor have little savings to collect interest from if they have a bank account at all and poor retirees get most of their income from SS.

    “The fact that you don’t understand that says quite a bit, regardless of who you purport to be.”

    I am a person who wants to enhance the social safety net. that’s who I am. you want to raise interest rates in a mini-depression. how’d that work during the great depression? europe since 2008 has raised rates twice and then quickly has had to reverse course. how’s that going?

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  40. 40
    pfft says:

    By Blurtman @ 37:

    RE: pfft @ 32 – OK, so you cannot supply a link of real historical data backing up Yellen’s ignorant statements.

    Well here is another real data point for you, deflating once again your baseless point of view.

    “According to the Federal Reserve’s most recent report, the median value of directly held stock in 2009, for families holding any, was approximately $12,000.”

    http://www.brighthub.com/money/investing/articles/117044.aspx

    Yesirreee, that rising stock market will certainly make those $12,000′ ers spend like mad.

    Yellen is a dumb arse.

    the wealth effect for both stocks and homes effects the ENTIRE ECONOMY not just those with stocks or own a home. most people’s biggest asset is their home so that is the biggest wealth effect.

    “OK, so you cannot supply a link of real historical data backing up Yellen’s ignorant statements.”

    Since Yellen used to best Greenspan I am pretty sure she could back up her statements to someone on a forum.

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  41. 41
    pfft says:

    How Do House Prices Affect Consumption?
    http://www.nber.org/digest/feb06/w11534.html

    Wealth Effects out of Financial and Housing Wealth: Cross Country and Age Group Comparisons
    http://www.frbsf.org/economic-research/files/wp07-01.pdf

    COMPARING WEALTH EFFECTS: THE STOCK MARKET VS. THE HOUSING MARKET
    BY
    KARL E. CASE, JOHN M. QUIGLEY and ROBERT J. SHILLER
    http://www.econ.yale.edu/~shiller/pubs/p1181.pdf

    The Housing Wealth Effect: The Crucial Roles of Demographics, Wealth Distribution and Wealth Shares
    http://www.nber.org/papers/w17740

    Wealth Effects Revisited: 1975-2012
    Karl E. Case, John M. Quigley, Robert J. Shiller
    http://www.nber.org/papers/w18667

    The (Mythical?) Housing Wealth Effect
    http://www.nber.org/papers/w15075

    How Large Is the Housing Wealth Effect? A New Approach
    http://www.nber.org/papers/w12746

    Was there ever a doubt I’d post links? When do I never?

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  42. 42
    whatsmyname says:

    By wreckingbull @ 36:

    RE: pfft @ 35 – ZIRP is very cruel to those who are most vulnerable. The fact that you don’t understand that says quite a bit, regardless of who you purport to be.

    Do you mean grandma, who must now choose between eroding the principal of her fixed income portfolio or living on SSI and medicare alone? Or do you mean the heirs of the decimated estate? (Just kidding, the doctors were going to get it all any,way – Do you mean the doctors?)

    If only the children (reciprocal pander) of the homeless and long term jobless could experience that kind of vulnerability.

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  43. 43

    This is your economy on Obamacare.

    http://www.businessinsider.com/q1-gdp-estimate-2014-5

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  44. 44

    RE: Blake @ 26

    Your Numbers are Probably Right for the Whole Nation

    I was referring to where the top 1-10% of incomes are investing…..mostly equities…the little guys got out of stocks and settle for putrid level saving rates you can’t retire on. The rich are trying to lure them back into stocks….then they MASS sell.

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  45. 45

    RE: pfft @ 34

    What it Means Is the Real estate Prices are Too High for Most Buyer Households

    Not that rich or higher incomes, not in the market [they already bought a home] juiced up on stocks will ever buy more RE. The wage deterioration of today’s home buyers isn’t like us lucky devil incomes [maybe some of us though] sitting in houses….therefore purchasing decreases overall, as rents increase too.

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  46. 46

    RE: softwarengineer @ 43

    Cooked Book U3 Unemployment Down

    And the GDP goes down too??????
    http://finance.yahoo.com/news/us-economy-shrank-1-percent-123523056.html

    More Cramer good news from our Pravda MSM…..LOL

    If this GDP decrement continues in 2014, the “bottom callers” on the Great 2008 stagflation have pie on their faces….meanwhile, stocks hit new highs….today’s prediction mode for the economy is mired in a cloud of Chinese air pollution….

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  47. 47
    David B. says:

    RE: Kary L. Krismer @ 15 – That’s but one instance of a very common problem. It happens with manufacturing (it takes time to build a factory, and multiple industrialists get the same idea at the same time). It happens with agriculture (crops don’t ripen overnight, multiple farmers get the idea to shift to a crop at once). And so on.

    It’s one of the key reasons market economies have up/down swings and the mythical equilibrium point tends to be, well, mythical.

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  48. 48
    David B. says:

    RE: Kary L. Krismer @ 43 – Yes, because the GDP never ever went down before Obamacare was passed, so it must be Obamacare that’s causing the decrease.

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  49. 49
    pfft says:

    By Kary L. Krismer @ 43:

    This is your economy on Obamacare.

    http://www.businessinsider.com/q1-gdp-estimate-2014-5

    did you read the article? nobody said it was from obamacare and from the chart provided it looks like healthcare was a positive contributor to the economy.

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  50. 50

    RE: pfft @ 49RE: David B. @ 48 – The article blamed it on the weather. If sales of real estate go down locally, try blaming it on the weather on this site and see what happens.

    But if you think it was the weather, please find one other first quarter where the economy was pushed into negative growth because of the weather. Weather happens every year, so if it was the weather it has to have happened before, right?

    And as to the press article not blaming the weather, so what? The press is filled with morons. Yesterday I posted a link where the press thought employers liked tight labor markets where they couldn’t fill positions. So I guess that makes it true, because that’s what they said.

    Finally, with Obamacare you would expect healthcare to grow as a percentage of the economy, just as you would expect the entire economy to decline.

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  51. 51

    RE: David B. @ 47 – I would agree with that, except the part about equilibrium being mythical, but still maintain my original point. We probably don’t want to be building new houses at the same rate as before the peak.

    The reason we get out of equilibrium is in part due to imperfect information. In this case, not every builder knows what every other builder is going to do.

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  52. 52
    pfft says:

    By Kary L. Krismer @ 50:

    RE: pfft @ 49RE: David B. @ 48 – The article blamed it on the weather. If sales of real estate go down locally, try blaming it on the weather on this site and see what happens.

    But if you think it was the weather, please find one other first quarter where the economy was pushed into negative growth because of the weather. Weather happens every year, so if it was the weather it has to have happened before, right?

    http://www.weather.com/news/winter-ncdc-state-climate-report-2013-2014-20140313

    NOAA’s National Climatic Data Center said that the period from December 2013 through February 2014 was the 34th coldest such period for the contiguous 48 states as a whole since modern records began in 1895.

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  53. 53
    Blake says:

    By softwarengineer @ 44:

    RE: Blake @ 26

    Your Numbers are Probably Right for the Whole Nation

    I was referring to where the top 1-10% of incomes are investing…..mostly equities…the little guys got out of stocks and settle for putrid level saving rates you can’t retire on. The rich are trying to lure them back into stocks….then they MASS sell.

    Exactly…unfortunately the ’08 crash left so many scars in the minds of the Main Street investors that they have been largely sitting on the sidelines watching the funds, traders, and Corps themselves bid up stocks. In the last year more Main Street investors have been starting to get in on the “fun” and have more skin in the game, but not enough for the pump and dump crowd.

    The people that own this country – the top 0.1% and 0.01% – overwhelmingly own bonds (the bond market is 3x the size of stocks) and are content earning 3-5% in a low inflation environment. When you have $50 million invested at 4%, $2 million a year is not bad. For Joe Schmoe with an average of $12,000 invested, a 4% return gives you only $480 bucks.

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  54. 54
    wreckingbull says:

    RE: whatsmyname @ 42 – Right, because Fed policy has been geared to help the long-term jobless. That’s pretty good! You should take that show on the road. Personally, I love ZIRP – as it has added to my coffers at a rather sickening rate and put me over the edge to permanent financial independence. That’s the problem. People like me, and perhaps you, are not the ones that need a ‘taste’ from Auntie Janet. It’s those squeezed right above our social programs and right below living wage that hurt the most, and yes, many of them are elderly, or ‘grandma’ as you put it.

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  55. 55

    By pfft @ 52:

    NOAA’s National Climatic Data Center said that the period from December 2013 through February 2014 was the 34th coldest such period for the contiguous 48 states as a whole since modern records began in 1895.

    Okay, so show me 33 other times when the economy contracted due to the weather. It should be roughly a 1 in 4 occurrence (33/(2014-1895)).

    Seriously people, if a real estate broker was quoted in a Seattle newspaper saying weather affected things, people here would be outraged, but you’re willing to accept such nonsense from a member of the press?

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  56. 56
    Blake says:

    By whatsmyname @ 38:

    RE: Blake @ 31 – Oftentimes, you make good points. I frequently agree with you, but David Stockman? Supply side pimp, and former Blackstone partner? Here is his defining moment: 1981 Atlantic article…

    Whatsmyname… I read a lot by former Republicans – – I have all of Kevin Phillips’ excellent books and his role as an advisor to Nixon and his race-baiting Southern Startegy is probably more pernicious than anything Stockman did in his short time in power. And I credit Stockman for telling the truth in that ’81 Atlantic piece… Stockman is a very smart guy and it is worth considering what he says even tho I may agree with only 50% of what he recommends. Like Marx, his analysis is usually spot on, while his prescriptions and recommendations may be off! ;-)

    Stockman’s two main points that he writes about daily are:
    1. Crony Capitalism
    http://billmoyers.com/segment/david-stockman-on-crony-capitalism/
    “… money dominates politics, distorting free markets and endangering democracy. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”
    2. The financial shenanigans by the Corps and Wall Street banks
    … he is truly an expert diving into the balance sheets and P&L statements.

    And in that interview with Moyers he said this:
    “Taxes are the price we pay for civilization,” Stockman says, borrowing a quotation from Supreme Court Justice Oliver Wendell Holmes. “What they’re saying today is foolish, it’s irresponsible. How can anyone believe with the kind of deficit that we have — a trillion dollars, year after year after year — that we can keep taxes as low as they are?”

    Yes, Stockman is worth considering…

    *** Being so antiwar, I also like Stockman’s consistent antiwar stances…
    This is excellent:
    http://davidstockmanscontracorner.com/bill-clintons-epic-double-cross-how-not-an-inch-brought-nato-to-russias-border/
    “…American foreign policy is mindlessly driven by the machinery of our Warfare State—a vast accretion of economic, diplomatic, spying and military capabilities which are ceaselessly in search of missions and justifications for their colossal call on the nation’s resources. If you don’t believe that just read Ray McGovern’s succinct summary below of the US’s epic double-cross of Russia on NATO….”

    He was anti-Vietnam war way back when…
    http://davidstockmanscontracorner.com/chicoms-are-coming/

    And this:
    http://davidstockmanscontracorner.com/good-job-yats-why-the-neocons-subverted-the-ukraine/

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  57. 57
    Blake says:

    By wreckingbull @ 54:

    RE: whatsmyname @ 42 – Right, because Fed policy has been geared to help the long-term jobless. That’s pretty good! You should take that show on the road. Personally, I love ZIRP – as it has added to my coffers at a rather sickening rate and put me over the edge to permanent financial independence. That’s the problem. People like me, and perhaps you, are not the ones that need a ‘taste’ from Auntie Janet. It’s those squeezed right above our social programs and right below living wage that hurt the most, and yes, many of them are elderly, or ‘grandma’ as you put it.

    Good point… it’s hard to argue with this. Team Obama’s policies have consistently helped the big guys and not the little people. Recall Geithner’s “foam the runways” comment about how HAMP was engineered to soften the big banks crash landing and not the homeowners! So sad… but true.

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  58. 58

    RE: Blake @ 53

    Actually Buffet is Heavy Into Stocks, So Is Roubini [Dr. Doom]

    That’s why he lost his shirt in 2008. He’s buying more stock to fix the problem now-a-days.
    But you’re right, the average investor didn’t hold during the 30% stock plunge in 2008, they sold at a loss. Had they stayed in [like SWE and Buffet] within about a year they would have gotten it all back….it takes courage, unpredicable luck and to be honest, some needed the money to pay 2008 bills too, so had to sell.

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  59. 59
    pfft says:

    By wreckingbull @ 54:

    RE: whatsmyname @ 42 – Right, because Fed policy has been geared to help the long-term jobless. That’s pretty good! You should take that show on the road. Personally, I love ZIRP – as it has added to my coffers at a rather sickening rate and put me over the edge to permanent financial independence. That’s the problem. People like me, and perhaps you, are not the ones that need a ‘taste’ from Auntie Janet. It’s those squeezed right above our social programs and right below living wage that hurt the most, and yes, many of them are elderly, or ‘grandma’ as you put it.

    you are going to punish the entire economy so that people get a little more on their savings? as I said the poor don’t have savings. most of the poor’s income if they are a retiree comes from SS. if you want to help them you should advocate upping SS checks like I do. if you live off interest income you are most likely rich. remember if you live off of interest income from bonds their value has gone up as yields have come down.

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  60. 60
    Azucar says:

    By softwarengineer @ 3:

    RE: Kary L. Krismer @ 2

    I saw on the H2 Channel last night “America’s Book of Secrets” that American billionaires have a secret agenda and really run this country in a shadow form. Perhaps, since they also control the media, they confuse us with irrelevent “Cramer” news and do whatever they wanted anyway….shadow government.

    It’s not just American billionaires…

    http://www.youtube.com/watch?v=TPMS6tGOACo

    I was vacationing in Colorado recently, and happened to be at “The Meadows” at the same time as one of the tri-annual meetings of the Pentaverate.

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  61. 61
    whatsmyname says:

    RE: wreckingbull @ 54:

    Wow, you slapped down that straw man so fast I nearly didn’t notice that no one (including myself) is arguing fed policy has been geared to help the long term jobless. My point, as you helpfully illustrated, is that some people think that people who live on the interest of their savings are somehow more vulnerable than those who have nothing – even though worst case for these unfortunates is to eventually be reduced to the status of those you consider less vulnerable. That is quite the mind trick.

    As pfft points out, adding inflationary pressure to consumables in order to create deflationary pressure on capital goods is of precious little service for the third at the bottom.

    RE: Blake @ 57
    The neutron rescue that tried to save the banks while leaving the consumers to founder predates Obama. It was ideological and it is the reason the recession was so bad. Obama’s policies were not great, but that die was already cast.

    There is no economic policy that won’t provide lots of help to big guys somewhere. So you can’t really judge a policy on that basis.

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  62. 62
    Blurtman says:

    RE: pfft @ 41 – Interesting links but typically irrelevant unless you can point out the links that describe a housing related wealth effect in an economy where:

    – Homeowners lost 55% of their housing wealth — more than $7 trillion — when the bubble burst. (http://www.marketwatch.com/story/how-the-bubble-destroyed-the-middle-class-2011-07-08)

    – 9.1 million U.S. residential properties were seriously underwater (in the first quarter of 2014), — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 17 percent of all properties with a mortgage in the first quarter. (http://www.realtytrac.com/content/foreclosure-market-report/q1-2014-home-equity-and-underwater-report-8037)

    – over 16 million homes were foreclosed from 2007-2011. (http://www.statisticbrain.com/home-foreclosure-statistics/)

    Again, you are referencing studies that are irrelevant to present day reality.

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  63. 63
    pfft says:

    By Blurtman @ 62:

    RE: pfft @ 41 – Interesting links but typically irrelevant unless you can point out the links that describe a housing related wealth effect in an economy where:

    – Homeowners lost 55% of their housing wealth — more than $7 trillion — when the bubble burst. (http://www.marketwatch.com/story/how-the-bubble-destroyed-the-middle-class-2011-07-08)

    – 9.1 million U.S. residential properties were seriously underwater (in the first quarter of 2014), — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 17 percent of all properties with a mortgage in the first quarter. (http://www.realtytrac.com/content/foreclosure-market-report/q1-2014-home-equity-and-underwater-report-8037)

    – over 16 million homes were foreclosed from 2007-2011. (http://www.statisticbrain.com/home-foreclosure-statistics/)

    Again, you are referencing studies that are irrelevant to present day reality.

    ok so let me understand this. in a world where consumption is being decimated by almost unprecedented household wealth destruction in home values and stocks you don’t think a policy to address those in that environment is helpful? it’s probably even more helpful now than in good times!

    ” Interesting links but typically irrelevant unless you can point out the links that describe a housing related wealth effect in an economy where”

    intersting huh? right. the wealth effect is well-known unless you got your economics education from zero hedge or mises.org Why don’t you post studies proving your point like I did? also your marketwatch article is nearly 3 years old!

    with regards to the wealth effect during a depression. the highest multiplier for stimulus spending was during the great depression because things were so bad. the multiplier was less this time around because we didn’t have a bad depression like 29. it’s safe to assume that in an era of falling home prices and stock markets the same is true during a crisis.

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  64. 64

    RE: Blurtman @ 62

    My Daughter Reports from Kansas City

    Homes are selling for like $40K, if any sell at all….the job market’s grim there too, but where isn’t it grim?

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  65. 65

    RE: softwarengineer @ 63

    My College Educated Millenial Daughter

    Has no college loans [I paid for her education with cash] and left Seattle with lots of savings….she worked for me for seven years, with full medical benefits too.

    Now that she’s met Mr. Perfect [LOL] and has here own 3 bdrm home with him, she’s very happy to out of SE KIng County. Her old SE King County friends report $1500/mo rents with two couples to an unit here, then financial crashes when one couple leaves suddenly.

    I’m getting used to living alone, and don’t want to support Millenials in my house anymore. But if/when she runs out of money in Kansas….helping supporting her there, I can afford….not the “high rent” Seattle area though.

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  66. 66
    pfft says:

    By Blurtman @ 62:

    RE: pfft @ 41 – Interesting links but typically irrelevant unless you can point out the links that describe a housing related wealth effect in an economy where:

    – Homeowners lost 55% of their housing wealth — more than $7 trillion — when the bubble burst. (http://www.marketwatch.com/story/how-the-bubble-destroyed-the-middle-class-2011-07-08)

    – 9.1 million U.S. residential properties were seriously underwater (in the first quarter of 2014), — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 17 percent of all properties with a mortgage in the first quarter. (http://www.realtytrac.com/content/foreclosure-market-report/q1-2014-home-equity-and-underwater-report-8037)

    – over 16 million homes were foreclosed from 2007-2011. (http://www.statisticbrain.com/home-foreclosure-statistics/)

    Again, you are referencing studies that are irrelevant to present day reality.

    you mean when house prices are falling it’s irrelevant that a policy to prop up home prices means that the wealth effect of housing will be LESS? are you kidding? you need it now more than ever. anyways you are moving the goal posts. you were proven wrong and now are saying yes but…

    when you argue that plunging home prices are crushing the economy you are using the wealth effect as an argument just in reverse. you only want it to work your way in a way that favors only your argument.

    it’s like all those people before the crash that said the banking system was in trouble but when people wanted to bail out the banking system suddenly banks failing wasn’t a bad deal. you can’t have it both ways.

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  67. 67
    Blurtman says:

    RE: pfft @ 66 – I think you are missing the point. Let’s return to where we came in, i.e., Yellen’s remarks:

    “…which supports the recovery by encouraging spending. And part of it comes through higher house and stock prices, which causes people with homes and stocks to spend more, which causes jobs to be created throughout the economy and income to go up throughout the economy.”

    My post describes the very recent RE carnage which includes a significant loss of wealth on the part of homeowners. Everyone saw their home equity plunge (for those that had measurable equity), many folks are still underwater, and many lost their homes. No matter which bucket you are in, rising home prices in light of the recent plunge cannot make folks spend more freely. Unless you are expecting folks to discount the recent out of control RE plunge which was due to fraud, captured regulators, and at least on the surface, a very clueless Fed. My point is that is quite unlikely that folks will forget, and so the studies that you cite are irrelevant as they do not examine the RE associated wealth affect after a massive RE and financial meltdown.

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  68. 68
    pfft says:

    By Blurtman @ 67:

    RE: pfft @ 66 – I think you are missing the point. Let’s return to where we came in, i.e., Yellen’s remarks:

    “…which supports the recovery by encouraging spending. And part of it comes through higher house and stock prices, which causes people with homes and stocks to spend more, which causes jobs to be created throughout the economy and income to go up throughout the economy.”

    My post describes the very recent RE carnage which includes a significant loss of wealth on the part of homeowners. Everyone saw their home equity plunge (for those that had measurable equity), many folks are still underwater, and many lost their homes. No matter which bucket you are in, rising home prices in light of the recent plunge cannot make folks spend more freely. Unless you are expecting folks to discount the recent out of control RE plunge which was due to fraud, captured regulators, and at least on the surface, a very clueless Fed. My point is that is quite unlikely that folks will forget, and so the studies that you cite are irrelevant as they do not examine the RE associated wealth affect after a massive RE and financial meltdown.

    I get it you want the wealth effect to only work in reverse because of your bearish bias. good to know.

    I proved you wrong and cited many sources and you moved the goal posts. got it.

    this is the exact moment when the wealth effect is probably the greatest, when home prices and stock prices were in peril.

    Anyway QE has given a positive effect on the economy.

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  69. 69
    pfft says:

    really?

    House Republicans defeat effort to punish wage theft
    http://www.dailykos.com/story/2014/05/30/1303097/-House-Republicans-defeat-effort-to-punish-wage-theft

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  70. 70
    Blurtman says:

    RE: pfft @ 68 – I think you are missing the point, once again. Certainly you would have to agree that the spending as well as other behaviors of Americans changed after the Great Depression, and in fact remained altered for quite some time thereafter. Likewise with the recent Great Recession.

    To extrapolate the findings of studies conducted on American spending habits before the Great Depression to habits after the Great Depression would be poor methodology. Likewise to do the same with habits after the Great Recession. And hence Yellen is quite wrong, which is indeed troubling.

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  71. 71
    One Eyed Man says:

    RE: Blurtman @ 70

    To some degree, your distaste for Yellen and your position as an adversary to Pfft seems to be causing you to overstate the case against the “wealth effect.” Yellen didn’t say that the “wealth effect” was the only way in which QE might improve the economy and employment, only that it was “part” of the means for such improvement.

    There are lots of theoretical studies that analyze the relationship between housing prices and general consumption. Case & Shiller and the Fed among others have done research that shows a correlation. The Great Depression and the Great Recession may through apprehension and fear affect the timing and magnitude of that correlation, but I find it extremely unlikely that they would eliminate that correlation.

    While there are those like Zerohedge that claim no such effect exists, I don’t think that there are statistical methodologies to conclusively prove causation or lack of causation for the relationship between wealth effect and increased consumption. But the work of Case and Shiller does show a correlation, and I find it contrary to both logic and human nature to believe that there is no correlation between having more wealth and being inclined to consume additional goods and services.

    Just because Yellen may be less than brilliant doesn’t mean that there hasn’t been an increase in spending due to the wealth effect in the post recession period. Many economists and perhaps some statistically based studies say that increased consumption from the current wealth effect is less than the historic norm, but not that it doesn’t exist. It’s historically something like 2 to 4% for stocks because the rich stockholders don’t need the money to fund their consumption habits. Because homes are more broadly owned than stocks, the spending of accumulated appreciation is something more like 3 to 6%. After the depression and after the recent recession, the rate of wealth effect spending likely fell below the historic norms as people shun risk and hunker down. But wealth effect would be a psychological antidote to the negative wealth effect of the recession. Its effect to immediately increase consumption may be less than the historic norm, but despite the rantings of those like Zerohedge who despise all things Keynesian, I doubt that anyone can prove that people are spending less because they have more wealth.

    You might not like Yellen and you might not like QE, but that doesn’t equate to proof that QE has been ineffective at decreasing the probability and amount of deflation, or that it hasn’t resulted in some of the increase in stock market valuation and home valuation being turned into increased consumption. Recession fears may have held down the rate at which the wealth effect contributes to consumption, but I don’t see how increased housing and stock market wealth could cause a negative impact on consumption.

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  72. 72
    Blurtman says:

    RE: One Eyed Man @ 71 – My disagreement with Pfft’s links can simply be summarized as “ceteris non paribus.” But this is why economics is such good sport, but bad science. I have postulated an hypothesis that I believe is quite plausible. While not disagreeing in the absolute, you do disagree with the magnitude. And so we can each puff on our pipes and muse, but until the PhD’s spend years going over the data, we may never really know.

    The rise in equities (appreciable quantities of which are not held by the average person) and the rise in home values is not real wealth. It is merely paper wealth, and has been shown in the very recent past to be quite ephemeral.

    “According to the Federal Reserve’s most recent report, the median value of directly held stock in 2009, for families holding any, was approximately $12,000. This represented a decline of 36% from $18,500 reported in 2007 and was largely attributable to the stock market’s free fall and the cyclical unemployment that forced households to raid their savings.” http://www.brighthub.com/money/investing/articles/117044.aspx

    Assuming that $12,000 is back up to $18,500 for the folks that did not raid it- Whoopee! Think I’ll buy that Porsche! Hence, Yellen is foolazhit!

    I truly believe that most Americans know that our financial system is a fraud, or at least, that something isn’t very right. And so I find it hard to believe that folks will appreciably revert to the past behaviors of more innocent times. But who knows, maybe they will elect yet another Bush president, or God forbid, another Clinton.

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  73. 73
    drshort says:

    Hoping some of the smart people on here might have some ideas with a family mortgage situation. Maybe Tim could make this a featured item (because it’s interesting in its absurdity).

    My father in law bought a house in 2006 with 100% financing. He’s been getting a reduced interest rate on a first and second loans due to wife being active military and has been able to make the payments. Now she’s out and the interest rates are going back to what’s stated in the note and he won’t be able to keep up.

    Transaction
    + Bought the house for $390 in 2006, now worth maybe $340K

    The mortgage details:
    + First mortgage is interest only 3/1 ARM at 7.99% for $290K. Since the index rate has gone down over time, this will be at this rate for the near future. However, the note states the rate cannot adjust down, only up.

    + Second mortgage is a 30 year at 11.75% for $100K amortized over 40 years. Balloon at 30 years.

    He asked me to take a look at his closing docs and I was a little appalled. In them I found:

    + There was a side loan for the seller to pay $13K in closing costs. This was clearly in the purchase and sale agreement. Someone hand wrote in not to record it for one year. I believe the lender had that added. Despite being in the P&S agreement it’s was nowhere in the loan docs. This would have made it over 100% LTV and the loan would have been denied. And there were two versions of the appraisal — one with this side loan included as part of an inflated purchase price ($403K) and a later one where it’s removed ($390K), so the lender knew of it.

    + The appraisal is complete crap. The comps are much nicer and nothing like the subject property. This is a cookie cutter home in Renton and plenty of close comparables to find.

    + There’s income listed on the application that isn’t real. Even with the fake income on the application the DTI was 46%. They needed all this fake income to qualify.

    + There’s some connection between the seller and now out of business mortgage broker. The broker just showed up one day with papers to sign after a few phone calls.

    Father in law isn’t very money smart (obviously) and was stupid to buy this house. He’s the poster child for unsophisticated borrower. Now he’s been trying to refi for years, but he’s still very much underwater since he bought at an inflated price in 2006. Lately he’s been trying to get a loan mod for a lower interest rate with no luck (probably because he’s current).

    Questions:

    + Could he use a predatory lending defense against foreclosure if it came to that? There was clear intentional fraud at origination (fake income, bad appraisal, unlisted home loan with instructions not to record). It’s been 8 years now, so that seems sketchy to me. But the only reason he’s been able to stay current has been the military program that significantly reduced his interest rates.

    + Is there a bankruptcy option (7 or 13) where he could eliminate the second mortgage? He could likely afford the first if the second wasn’t there.

    + Can the predatory lending / mortgage fraud argument be used to motivate the lender to modify the loan?

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  74. 74
    Macro Investor says:

    RE: drshort @ 73

    You left out important information. What is his income, and what is the value of his other assets? Based on your story, I would guess he has a car or two on payments and not much else. Therefore, there isn’t anything they could sue him for.

    He should stop making payments immediately. The lenders don’t want another under water property. They will suddenly decide it’s best to negotiate the terms of the loan to keep him paying.

    Don’t bother with lawyers, accountants or anyone who gives advice for a fee. That makes sense only for someone with wealth to protect. Also, make sure he banks the savings from not paying the mortgage. Most people blow it on big boy toys. He’ll need the cash for down payment on a new place or a rental. This last paragraph is why most people stay poor their entire lives. STOP SPENDING.

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  75. 75
    Blurtman says:

    RE: Macro Investor @ 74 – He is less underwater than before. Yellen says SPEND!

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