Mid-Week Open Thread (2010-08-25)

Here is your open thread for the mid-week on August 25th, 2010. 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!

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

64 comments:

  1. 1
    bob says:

    Rent to Price Ratios? In pre-bubble times, folks that were longer-term investors looked at rent:price of ~100 to 140 depending on housing type and location. Where do people think the ratios are in the Seattle area – do you think we will ever get back to the older values? Or have prolonged low mortgage rates significantly changed this way of evaluation

  2. 2
    Trigger says:

    I am surprised people are looking that it is a big deal that sales of houses is going down and the economy is about to tank. They are no longer stimulating the economy so much so no wonder. If Obama wants the economy to zoom he just needs to pump more money and then just keep pumping until the economy goes to overdrive.

    Same thing is with unemployment. Consumer sentiment will not go up if people are left without jobs. So govt should quickly employ all the people who need this and the problem will get smaller. People will spend lots of money if they get them.

    Instead of looking at realistic economy and things like – you have to spend only what you earn – this is a fish. The US has nukes and can afford to spend more than it earns.

  3. 3
    matsayswhat says:

    By Trigger @ 2:

    The US has nukes and can afford to spend more than it earns.

    LOL

    The big talk is the 30 year rate dropping below 4. Will it drop below 3? How will those people with modified loans feel about the deal they got when their interest rate isn’t comparably awesome anymore?

  4. 4
    Sniglet says:

    I just posted the recording of my weekly economics internet radio show from last night. As you will see, our discussion on Seattlebubble earlier this week inspired me.

    In this episode the Optimistic Bear rants about how the public sector employees are now paid MORE than private sector counterparts and that there is no way to save the unfunded civil service pensions.

    http://surkanstance.blogspot.com/2010/08/this-week-on-bear-radio-greedy-civil.html

  5. 5
    Scotsman says:

    MS says government bond defaults are “inevitable.” Hmmm, looks like some can still do more than make coffee or hand you the card for the tanning bed- a few people remember what math is all about. Holy Sniechy, Batman! this will put a crimp in that stimulus effort:

    http://www.bloomberg.com/news/2010-08-25/morgan-stanley-says-government-bond-default-is-question-of-how-not-if-.html

  6. 6
    Scotsman says:

    More “Cash for Clunkers” unintended consequences- used car prices are up an average of 10% over this time last year. Who would have thought destroying billions of dollars of assets would affect prices? And of course the poor are hardest hit. Nice.

    http://hotair.com/archives/2010/08/25/used-car-prices-skyrocket-a-year-after-cash-for-clunkers/

  7. 7

    RE: Scotsman @ 6 – I probably mentioned the likely effect on used car prices, as well as non-dealer mechanics. It’s probably worse than what the numbers you linked to indicated because I doubt they can track the price of real clunkers.

  8. 8
    Dirty_Renter says:

    CNBC is airing an update on Madoff tonight @ 6PM our time. It’s about his life in prison.
    Let us not forget what he said about his investors earlier this year, “F*** the greedy b*stards.”
    You can’t make this stuff up!!!!!
    The guy is a certifiable psychopath, imho, and it will be a fascinating case-study of greed.

    I guess the takeaway is to take good care of your money, no one else will.

  9. 9
    One Eyed Man says:

    RE: Scotsman @ 5

    “Default” may be coming, but it is very broadly defined by MS.

    “Rather than miss principal and interest payments, governments may choose a “soft” default in which they pay back debts with devalued currencies resulting from faster inflation or force creditors to take lower returns, Mares said in an interview.”

  10. 10
    Trigger says:

    RE: Scotsman @ 6 – Scotsman – I do not understand how the cash for clunkers program would increase the used car prices so dramatically. So has the demand for used cars gone up so much because people were buying new cars? It does not make sense. Can you make an economic argument?

  11. 11
  12. 12
    One Eyed Man says:

    RE: Trigger @ 10

    Kary is right, but there’s a lot more involved than just cash for clunkers Trigger. Consider the fact that the new car market went from 15 million units to about 10 million. That probably means at least several million fewer used cars for sale even without “cash for clunkers” so the supply of used cars was already down several million units. Cash for Cluckers took 700K cars out of the market, but the slow down in new car sales probably took several times that many out of the market. Then consider that in this economy, more people are watching their budget and they aren’t using a HELOC to come up with the cash to afford a new car. That probably means an increase in the demand for used cars (at least as a portion of the car market).

    “Cash for Clunkers” contributed to the rise in used car prices, but there are other substantial factors causing the increase. HotAir mentions some of the factors, but they emphasize Cash for Clunders because it serves their agenda to paint government activity in general and Obama in particular as stupid and counter productive. Not to say that there is no truth to that, but just that HotAir is probably more interested in making their case than presenting an objective analysis.

  13. 13
    sparky says:

    RE: Trigger @ 10 – I’d assume that many of the people who purchased during cash for clunkers would have eventually bought a new car anyway, and when they did they would have sold their old ones. Instead, they bought the new car, but destroyed the old one.

    There’s another group of people who would be buying the first group’s used cars. Since a bunch of those cars were destroyed, that second group (who wasn’t and isn’t going to buy a new car) now have a much smaller pool of cars to purchase from. Supply goes down, prices go up…

  14. 14
    Brad999 says:

    Trigger – demand has probably gone up as many more people are under economic stress and more likely to look for a used car than a new, but the direct effect of cash for clunkers was to reduce the supply of less expensive used cars. Lots of perfectly functional used cars were junked instead of resold.

    I was going to buy an old 4×4 truck to get to trailheads last summer. I was willing to spend about $3-5k, and there was plenty of supply at that price. When cash for clunkers hit, suddenly any old piece of crap that barely ran was worth closer to $9k, because of all the dealer match incentives on top of the government incentive. Now almost all cars in that range disappeared if the owners were even considering ever getting rid of them.

  15. 15
    Scotsman says:

    Hey Pfft- look what I found for you! Sign up, study at your own pace, let me know if you have any questions. Soon enough you’ll understand what Krugman is leaving out of his presentations. . .

    http://ocw.mit.edu/courses/economics/14-02-principles-of-macroeconomics-fall-2009/

  16. 16

    RE: Brad999 @ 14 – My 89 Ranger is probably worth $1,000 again!

  17. 17

    Hey Tim. My wife listens to Ron and Don, so that means this afternoon I caught most of your piece on their show. Not bad for a somewhat hostile environment.

  18. 18

    By Kary L. Krismer @ 16:

    RE: Brad999 @ 14 – My 89 Ranger is probably worth $1,000 again!

    Hold on to it. By 2020 it might be worth $1, 050.00

  19. 19
    BillE says:

    You’d never know we’ve been in a recession based on the prices for used vehicles lately. A friend and I were just talking yesterday about the insane prices on used pickups. Even trucks with 200k miles are priced at a premium.

  20. 20

    By BillE @ 19:

    You’d never know we’ve been in a recession based on the prices for used vehicles lately. A friend and I were just talking yesterday about the insane prices on used pickups. Even trucks with 200k miles are priced at a premium.

    If only there were some place where people had discussed the reason for that. ;-)

  21. 21

    Is there a site anywhere that tracks the number of new houses that are complete or substantially complete locally? The NWMLS system isn’t good for that at all because some listings haven’t even broke ground and some developments only list a part of their inventory.

  22. 22
  23. 23
    mukoh says:

    Kary,
    Try calling a good title company who has access to new home trends.

  24. 24
    Ricoshea says:

    Looks like more of the double standard of businesses defaulting on loans because it is good business and homeowners defaulting as a moral issue.

    http://online.wsj.com/article/SB10001424052748703447004575449803607666216.html?mod=googlenews_wsj

  25. 25

    RE: mukoh @ 23 – I don’t think they would have any way of knowing how many were built up but not yet sold. They would know when the dirt was sold, could look up when it was subdivided, and would know when it was sold as a SFR house.

  26. 26

    RE: Ricoshea @ 24RE: Cheap South @ 22 – Don’t believe everything you read (especially from the WSJ).

    As to underwater mortgages, there’s simply know way to know that sort of thing with any decent accuracy. Both the value and debt sides are difficult/impossible to determine.

    As to the commercial building owners walking away, it’s probably mainly happening as a matter of choice by very solvent entities where they have non-recourse loans. (And obviously DB would prefer such entities when you’re looking at investment possibilities). Where the loan is recourse, in many/most states the lender has significant remedies that are not typically available with SFR property, including seizing rents while they sue. I would suspect that most these entities not paying are either not as solvent as the article would lead you to believe, or they have a loan coming due and have been told the lender won’t renew it and cannot get other replacement financing.

  27. 27
    Polly says:

    Has this nifty little graph already been discussed?
    http://macromarkets.com/apps/gap_gauge/

  28. 28
    Scotsman says:

    RE: Polly @ 27

    A flaw in their presentation is the rising red line of home price appreciation seems to suggest that it’s rate of increase is the norm. If you use the original CS data and go back to before the real start of the bubble, say 1970, you can see that home prices still have much further to fall than this presentation suggests. This tidy presentation suggests we have already over corrected for price when a more complete picture would show that it’s only through subtle data manipulation that one reaches the conclusion.

  29. 29

    RE: Scotsman @ 28RE: Polly @ 27 – Neat graph. I didn’t look hard, but I couldn’t see what their baseline trend was based on. Seattle and San Fran seems to have baselines that were more curved than other cities. It seems to be some sort of moving average.

    Scotsman, I still haven’t had the second cup of coffee yet, but C-S doesn’t adjust for inflation (does it?) and that would affect the numbers over the time frame you bring up. Over that time frame, given inflation you would expect home price appreciation to be the norm due to inflation.

  30. 30
  31. 31
    Poco Ritard says:

    RE: Dirty_Renter @ 8
    I think the term you’re looking for is sociopath

  32. 32
    bt says:

    RE: Polly @ 27

    At least for San Francisco the “baseline” is quite strange. Given the pictured data the baseline should have had (gasp) a negative curvature.

  33. 33
    Dirty_Renter says:

    RE: Poco Ritard @ 31
    Since I don’t know the difference….I’ll take your word for it. :)
    I watched the episode and was disappointed that he was adjusting to prison life rather well.

  34. 34
  35. 35
    The Tim says:

    RE: Kary L. Krismer @ 17 – Hey, thanks. It’s the first time I’ve gone on a show that’s less “newsy” and more “pop-culturey.” I thought it was fun. I was surprised how long they let me ramble. :^)

  36. 36

    RE: The Kid @ 30
    Just once, just once I want to see a real estate listing with the description ” money pit piece-o-crap”.

  37. 37

    “via @KIRO7Seattle “Industry analyst Tim Ellis says the tax credit was a short term fix for a long-term problem.” http://is.gd/eDJLE 20 hrs ago”

    I like “industry analyst.” And it’s much more accurate than calling him ” blogger dude”.

  38. 38
    Trigger says:

    RE: Scotsman @ 15 – Scotsman – people are not looking at standard economics lectures. If we did – they all encourage you to spend what you can afford because otherwise you end up in a mess. The standard economics books would tell you subprime was a real mess.

    But we are past this.

    Now we are looking at the following scenario:
    – We want to keep spending more than we can afford
    – We want to create unsustainable debt
    – We want to print a lot of money and flood the market with cash

    And we want to keep getting away with it over and over again. This is the issue. And we need to do it right. One way is to live at other countries expense. Or maybe do sthg different.

    But we are not talking about standard economics books. They all look filthy right now. In fact colleges like MIT should consider not teaching standard economics. Because we live in new times and now we have to figure out a way to spend a lot and just keep spending. Once you realize this – then you will turn to alternative theories.

    It is like having cancer in final stages. What do you then? Do you apply logic then? Absolutely not. You look at different experimental methods to make things work. This is all what the game is about. If Bernake can pull this off – MIT will teach new theories in economics and Bernake will win a Nobel Prize.

  39. 39
    jj says:

    RE: Scotsman @ 28
    RE: Polly @ 27

    I agree with Scotsman (gasp) that the baseline trend rate of growth seems awfully arbitrary… It looks like they just did regression analysis on the price change between 1987 and 2000 (notice the trendline) to come up with an annual rate of change, and you’ll note that on every graph, there is a pretty significant uptick between 1987 and 1989 and 1996 and 2000 – two small housing bubbles.

    1980 17710 44059 65000 82 16948 1273 45332
    1981 19074 43328 69000 91 18042 1094 44421
    1982 20171 43212 69000 97 18780 738 43950
    1983 20885 42910 75000 100 20279 1499 44409
    1984 22415 44242 80000 104 22388 2108 46351
    1985 23618 45069 84000 108 25752 3365 48434
    1986 24897 46665 92000 110 28353 2601 49266
    1987 26061 47251 62 105000 114 30234 1881 49131
    1988 27225 47614 67 113000 118 32791 2558 50171
    1989 28906 48463 72 120000 124 35556 2764 51227
    1990 29943 47818 76 122000 131 37970 2414 50232
    1991 30126 46445 73 120000 136 39407 1437 47882
    1992 30636 46063 74 122000 140 41171 1765 47828
    1993 31241 45839 74 127000 145 43354 2183 48022
    1994 32264 46351 76 130000 148 45782 2428 48779
    1995 34076 47803 78 134000 152 48591 2809 50612
    1996 35492 48499 80 140000 157 51248 2657 51156
    1997 37005 49497 82 146000 161 53429 2181 51678
    1998 38885 51295 86 152000 163 56828 3399 54694
    1999 40696 52587 92 161000 167 60094 3265 55852
    2000 41990 52500 100 169000 172 64569 4476 56976
    2001 42228 51356 109 175000 177 70075 5506 56861
    2002 42409 50756 118 188000 180 76241 6166 56922
    2003 43318 50711 130 195000 184 84866 8625 59336
    2004 44334 50535 146 221000 189 93257 8391 58926
    2005 46326 51093 169 241000 195 102663 9406 60499
    2006 48201 51473 189 247000 202 111455 8792 60265
    2007 50233 52163 185 247000 207 118185 6730 58893
    2008 50303 50303 159 232000 214 118133 -52 50251

  40. 40
    Scotsman says:

    RE: Trigger @ 38

    “It is like having cancer in final stages”

    So you agree we’re all dead, as is the economy, in the end? ;-)

  41. 41
    Scotsman says:

    No job, no payment. When unemployment and savings run out and the jobs still aren’t there, deliquincies rise.

    “Home loans overdue by a month climbed to 3.51 percent, from 3.45 percent in the first quarter, according to a report today from the Washington-based Mortgage Bankers Association. The increase was led by mortgages guaranteed by the Federal Housing Administration. The one-month late rate for that type of home loan rose to 5.77 percent from 5.54 percent.”

    http://www.bloomberg.com/news/2010-08-26/mortgage-payments-one-month-overdue-increase-as-u-s-economic-growth-slows.html

  42. 42
    jj says:

    tim, can you delete me at 39? thanks
    RE: Scotsman @ 28
    RE: Polly @ 27

    I agree with Scotsman (gasp) that the baseline trend rate of growth seems awfully arbitrary… It looks like they just did regression analysis on the price change between 1987 and 2000 (notice the trendline) to come up with an annual rate of change, and you’ll note that on every graph, there is a pretty significant uptick between 1987 and 1989 and 1996 and 2000 – two small housing bubbles.

    Put together some data that I was interested in reviewing, thought it might be interesting for others to review:
    column 1 is year
    column 2 is US median household income (not inflation adjusted)
    column 3 is US median household income adjusted to 2008 dollars
    column 4 is case shiller index (january of each year)
    column 5 is the median new home sales price (not adjusted)
    column 6 is the consumer price index
    column 7 is mean accumulated household debt (mortgage + consumer credit)
    column 8 is income from annual household accumulation of debt
    column 9 is median household income (adjusted) + income from annual debt accumulation
    **data from us census, bureau of labor and statistics, Wiki Case Shiller article, and the federal reserve

    1980 17710 44059 65000 82 16948 1273 45332
    1981 19074 43328 69000 91 18042 1094 44421
    1982 20171 43212 69000 97 18780 738 43950
    1983 20885 42910 75000 100 20279 1499 44409
    1984 22415 44242 80000 104 22388 2108 46351
    1985 23618 45069 84000 108 25752 3365 48434
    1986 24897 46665 92000 110 28353 2601 49266
    1987 26061 47251 62 105000 114 30234 1881 49131
    1988 27225 47614 67 113000 118 32791 2558 50171
    1989 28906 48463 72 120000 124 35556 2764 51227
    1990 29943 47818 76 122000 131 37970 2414 50232
    1991 30126 46445 73 120000 136 39407 1437 47882
    1992 30636 46063 74 122000 140 41171 1765 47828
    1993 31241 45839 74 127000 145 43354 2183 48022
    1994 32264 46351 76 130000 148 45782 2428 48779
    1995 34076 47803 78 134000 152 48591 2809 50612
    1996 35492 48499 80 140000 157 51248 2657 51156
    1997 37005 49497 82 146000 161 53429 2181 51678
    1998 38885 51295 86 152000 163 56828 3399 54694
    1999 40696 52587 92 161000 167 60094 3265 55852
    2000 41990 52500 100 169000 172 64569 4476 56976
    2001 42228 51356 109 175000 177 70075 5506 56861
    2002 42409 50756 118 188000 180 76241 6166 56922
    2003 43318 50711 130 195000 184 84866 8625 59336
    2004 44334 50535 146 221000 189 93257 8391 58926
    2005 46326 51093 169 241000 195 102663 9406 60499
    2006 48201 51473 189 247000 202 111455 8792 60265
    2007 50233 52163 185 247000 207 118185 6730 58893
    2008 50303 50303 159 232000 214 118133 -52 50251
    2009 (50303) 136 114979 -3155 47148

    household debt (mortgage and consumer credit) nearly tripled from 1975 to 1985, when household debt and median income first reached a 1:1 ratio. Since ’85, the ratio has skyrocketed to 2.4:1, largely as a result of stagnation of inflation adjusted incomes and consumers supplementing stagnating wages with money from consumer and mortgage debt.

    What is most stunning to me is looking at the comparison of (median income + annual income from debt) in 2006 vs. 2009 (assuming stable median income from 2008 to 2009), dropping from 60265 to 47145. But at least it looks like people are paying off household debt (or defaulting). At 120 million households and ~$11000 decreased spending per household (after income taxes), we are talking about $1.3 trillion per annum decrease in consumer spending in the US economy compared with 2003-2006. Thats gotta hurt.

    I think the large debt burden, stagnating wages, and decreased disposable income from debt repayment will all contribute to continued housing price declines. Huge decrease in consumer spending will further weaken our already struggling economy leading to increased unemployment and decreased wages for those who are working, which will also send housing prices lower.

    Smoke ’em while you got ’em.

  43. 43
    jj says:

    correction
    … looks like they just did regression analysis on the price change between 1987 and 2000 (notice the trendline AND THE CSI LINE ALWAYS CROSS AT 2000) to come up with an annual rate of change…

    also just noticed the formatting on the table is all screwed up… i could send you a excel spreadsheet.

  44. 44
    mukoh says:

    RE: Kary L. Krismer @ 25 – I have seen reports at least with NHT logos that summarized by plat amount built/amount sold/amount standing etc…

  45. 45
    Trigger says:

    RE: Scotsman @ 40 – No. I believe we can get out of this without sacrificing lifestyle but have to really do it smart.
    – We need to borrow without intending to return what we borrow. The countries need to believe that getting your debt to say 500% of GDP is not a red flag.
    – We need to do the printing. Stimulus should be the game. We should constantly stimulate ourselves and the economy then go hiking.
    – We need to push for positive attitude. CNN should only talk about how the economy is zooming. Positive news provides a sense for security.
    – The govt should employ all unemployed and bring back the unemployment figure to say 6%. Millions of jobs need to be created within 1 year.
    – Taxes should be further cut to make business happy so they do not outsource jobs so much.
    – We need to make sure everybody is aware the US has nukes
    – We need to make China and others aware that if they stop producing toys for Americans they are toast. We need to force them to freely float the juan and let it appreciate against the $$.
    – Interest rates should be left really at 0

    If all of this does not work – then too bad. We at least tried.

    So basically the time is to go for a nice hike and keep a bullish attitude.

    Now justify why all of this has a 100% certainty that it will fail. I know colleges like MIT will laugh at this strategy but so what. We need to look at alternative remedies – not the standard ones that MIT or other good schools preach.

  46. 46
    Trigger says:

    RE: Scotsman @ 40

    We need to create a special govt agency that will work with the media to create the right news so that people spend more, hike more and feel more upbeat.

    This is a good article:
    http://finance.yahoo.com/news/Bernankes-top-tool-now-may-be-apf-3179763394.html?x=0&sec=topStories&pos=1&asset=&ccode=

    WASHINGTON (AP) — The economy appears to be stalling. Yet the Federal Reserve has run out of simple steps it can take to revive it.

    That’s the test facing Fed Chairman Ben Bernanke as he addresses a conference Friday in Jackson Hole, Wyo. Without any easy options left, Bernanke must try to prevent another recession by persuading people and businesses to feel confident enough about the future to spend more today.

  47. 47
    Scotsman says:

    One out of ten mortgage holders is at risk of foreclosure?

    http://www.msnbc.msn.com/id/38864587/ns/business-real_estate/

  48. 48
    Scotsman says:

    RE: Trigger @ 45

    I have no doubt your ideas will work, and for some period of time. But the question is, for how long? Add to that the reality that we may have already been trying to implement many of your ideas for perhaps 20-25 years, and are not now starting at zero, and guessing the time line becomes even more difficult. I will admit, however, that it will probably work for much longer than I would expect. Others expect it to work almost forever. Even more don’t even know there’s an issue like this on the table.

  49. 49
  50. 50
  51. 51
    pfft says:

    By Trigger @ 2:

    I am surprised people are looking that it is a big deal that sales of houses is going down and the economy is about to tank. They are no longer stimulating the economy so much so no wonder. If Obama wants the economy to zoom he just needs to pump more money and then just keep pumping until the economy goes to overdrive.

    Same thing is with unemployment. Consumer sentiment will not go up if people are left without jobs. So govt should quickly employ all the people who need this and the problem will get smaller. People will spend lots of money if they get them.

    Instead of looking at realistic economy and things like – you have to spend only what you earn – this is a fish. The US has nukes and can afford to spend more than it earns.

    when the government spend money in a downturn it actually saves money.

    If Washington had not reacted as quickly and as forcefully as it did, the two economists write, “the costs to U.S. taxpayers would have been vastly greater.”

    With no special government intervention, the 2010 deficit would have passed $2 trillion, according to their model. It would have reached $2.6 trillion in fiscal 2011 and $2.25 trillion in 2012.

    austerity=more debt.

  52. 52
    HappyRenter says:

    RE: pfft @ 51
    The question is how well was it spent? Buying full body scanners for airports? Borrowing demand from the future in RE?

    On the other hand, universities took big cuts. Tuition fees went up. Why wasn’t the stimulus spent to save positions at the U and keep education affordable? ok, there was the ARRA, but very few labs got it. We will see the effects of how the stimulus was spent in 5-10 years, when the lower quality of university education will have its repercussions in the economy.

  53. 53
    pfft says:

    By HappyRenter @ 52:

    RE: pfft @ 51
    The question is how well was it spent?

    actually it doesn’t matter. 1/3 was tax cuts, 1/3 was infrastructure and 1/3 was aid to local govenrments and etc.

  54. 54
    BondsOfSteel says:

    RE: Trigger @ 46

    >We need to create a special govt agency that will work with the media to create the right
    >news so that people spend more, hike more and feel more upbeat.

    We just need more awesome cartoons like this one: http://www.youtube.com/watch?v=VjGTCchapOk

    The song at the end is catchy :)

  55. 55
    pfft says:

    By Scotsman @ 6:

    More “Cash for Clunkers” unintended consequences- used car prices are up an average of 10% over this time last year. Who would have thought destroying billions of dollars of assets would affect prices? And of course the poor are hardest hit. Nice.

    http://hotair.com/archives/2010/08/25/used-car-prices-skyrocket-a-year-after-cash-for-clunkers/

    car sales are up generally so it isn’t all cash for clunkers.

    you aren’t destroying it as the cars are recycled. cars are the most recycled good on the planet.

  56. 56
    pfft says:

    By One Eyed Man @ 9:

    RE: Scotsman @ 5

    “Default” may be coming, but it is very broadly defined by MS.

    “Rather than miss principal and interest payments, governments may choose a â��softâ�� default in which they pay back debts with devalued currencies resulting from faster inflation or force creditors to take lower returns, Mares said in an interview.”

    did you expect scotsman to be accurate?

  57. 57
    pfft says:

    By Trigger @ 38:

    RE: Scotsman @ 15 – Scotsman – people are not looking at standard economics lectures. If we did – they all encourage you to spend what you can afford because otherwise you end up in a mess. The standard economics books would tell you subprime was a real mess.

    But we are past this.

    Now we are looking at the following scenario:
    – We want to keep spending more than we can afford
    – We want to create unsustainable debt
    – We want to print a lot of money and flood the market with cash

    And we want to keep getting away with it over and over again. This is the issue. And we need to do it right. One way is to live at other countries expense. Or maybe do sthg different.

    But we are not talking about standard economics books. They all look filthy right now. In fact colleges like MIT should consider not teaching standard economics. Because we live in new times and now we have to figure out a way to spend a lot and just keep spending. Once you realize this – then you will turn to alternative theories.

    It is like having cancer in final stages. What do you then? Do you apply logic then? Absolutely not. You look at different experimental methods to make things work. This is all what the game is about. If Bernake can pull this off – MIT will teach new theories in economics and Bernake will win a Nobel Prize.

    this is complete nonsense. we know what to do. deficit spend and it’s worked. even mccain’s economic advisor knows that.

    even republicans know that. they tout the stimulus at home and bash it in washington. even rick perry in texas has taken stimulus money to balance his budget.

    the stimulus worked. deal with it. how could we spend $700 billion dollars and not effect the economy.

  58. 58
    pfft says:

    weekly claims were heavily referenced by the bears here. now that they plunged not a word. not a word.

    In the week ending Aug. 21, the advance figure for seasonally adjusted initial claims was 473,000, a decrease of 31,000 from the previous week’s revised figure of 504,000.

    http://www.calculatedriskblog.com/2010/08/weekly-initial-unemployment-claims_26.html

    that’s just how you guys operate. every bad piece of news is the end of the world. you throw anything at the wall and hope it sticks w/o any sort of coherent way to judge the economy.

  59. 59
    pfft says:

    Ireland not looking so good. another austerity FAIL.

    Ireland’s `Vicious Circle’ Leaves Banks Facing Higher Debt Cost
    http://www.bloomberg.com/news/2010-08-25/ireland-s-vicious-circle-leaves-banks-facing-higher-debt-financing-costs.html

    In Ireland, a Picture of the High Cost of Austerity
    http://www.nytimes.com/2010/06/29/business/global/29austerity.html?hp

    Ireland And Spain, Revisited
    http://krugman.blogs.nytimes.com/2010/08/26/ireland-and-spain-revisited/

    austerity don’t work. if we took austerity(government did nothing to stem the crisis) we be even deeper in debt. $2.7 trillion dollars more over 2010, 2011 and 2012.

  60. 60
    Sniglet says:

    Ireland not looking so good. another austerity FAIL.

    Ireland’s economy is “failing” just the way an alcoholic starts “failing” when they first go off the sauce. The only difference between Ireland and the USA is that Ireland ran out of enablers to keep feeding it’s habit of cheap credit sooner. In the end, however, I think that Ireland will actually come out the other side of the depression faster.

    Small countries don’t have the luxury, or resources, to defy economic gravity in the way that large nations do. They crash harder (and faster) when times are tough, but they also tend to recover much faster too. I think it speaks volumes that the economic troubles from the great depression of the 1930s persisted longer, and became more dire, in the USA than in many other nations.

  61. 61
    pfft says:

    By Sniglet @ 60:

    Ireland not looking so good. another austerity FAIL.

    Ireland’s economy is “failing” just the way an alcoholic starts “failing” when they first go off the sauce. The only difference between Ireland and the USA is that Ireland ran out of enablers to keep feeding it’s habit of cheap credit sooner. In the end, however, I think that Ireland will actually come out the other side of the depression faster.

    Small countries don’t have the luxury, or resources, to defy economic gravity in the way that large nations do. They crash harder (and faster) when times are tough, but they also tend to recover much faster too. I think it speaks volumes that the economic troubles from the great depression of the 1930s persisted longer, and became more dire, in the USA than in many other nations.

    now that Ireland is failing and austerity is failing you make news excuses? how come you never told us that before? your alcoholic example is a poor one too. people who are alcoholics or are addicted to other drugs can have very serious withdrawal symptoms.

    the difference between the US and Ireland is that the US has it’s own currency and monetary policy. Ireland has the euro and doesn’t have it’s own monetary policy. it has germany’s.

    “In the end, however, I think that Ireland will actually come out the other side of the depression faster.”

    really? the US has had positive GDP growth for a year. so have all the stimulus countries except spain. spain is barely contracting.

    nobody can say they just need more austerity because that causes an austerity spiral. less spending equals less demand equals less revenue equal more debt. that’s no solution.

    “I think it speaks volumes that the economic troubles from the great depression of the 1930s persisted longer, and became more dire, in the USA than in many other nations.”

    hoover didn’t do much for the economy and it plunged. it plunged until FDR got into office.

  62. 62
    Scotsman says:

    RE: pfft @ 55

    “you aren’t destroying it as the cars are recycled”

    Are you serious? We’re talking about wealth. I don’t care if the car gets “recycled.” As a running car it may be worth $2,000. As recycled scrap it’s currently worth $160/ton or maybe $250 for the average car. That’s $1750 of “wealth” destroyed, gone from the system.

    As for your other posts, there’s so much nonsense i don’t know where to start, so I won’t. You have overwhelmed me. Congrats.

    If you were my kid you’d be grounded for a week and forced to put your nose in a book until some sort of light began to come on in that head of yours.

  63. 63
    Scotsman says:

    RE: pfft @ 58

    OK, I’ll respond to this one:

    “weekly (unemployment) claims were heavily referenced by the bears here. now that they plunged not a word. not a word.”

    Let’s look a little deeper into the number and the “decline” that every bear is afraid to reference. If we look at the 4-week moving average it was 486,750, an increase of 3,250 from the previous week’s revised average of 483,500. So while the week’s number may be down, the trend is still up. Second, let’s take a look at the total number of people on unemployment. The average for 2009 was right at 3 million. For the last week of July, 2010 it was 4.7 million. For the first week of Aug. 2010 it was 4.9 million, an increase of 200K. so for all the improvement you keep touting we still have to deal with the fact that there are now almost 2.0 million more people, an increase of 65%, on unemployment now than there were on average for last year. I call that a negative trend, and don’t really care about a 5% weekly swing up or down. And the referenced increase doesn’t take into accounbt all of those still unemployed, but unable to qualify for even the extended benefits. the real numbers are worse.

    If you can tell me what I should be getting excited about in the above numbers, be my guest. Otherwise, I stand by my original prediction- depression ahead.

  64. 64
    Sniglet says:

    hoover didn’t do much for the economy and it plunged. it plunged until FDR got into office.

    Actually, Hoover was very aggressive with stimulus, angering not only his secretary of the treasury but much of his Republican base. FDR merely continued with what Hoover had begun (i.e. lots of extra government spending/stimulus).

    Together, Hoover and FDR managed to extend the depression for many years longer than would otherwise been the case if the economy had been allowed to clear out the mal-investments and re-allign labour/investment on it’s own.

    The paralells with Bush and Obama are stunning. Bush was a “conservative” who poured on stimulus when times got tough, just like Hoover. And Obama just carried the stimulus ball forward, just like FDR.

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