Case-Shiller: Year-Over-Year Gains Stabilizing in June

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Let’s have a look at the latest data from the Case-Shiller Home Price Index. According to April data, Seattle-area home prices were:

Up 1.1% May to June
Up 7.4% YOY.
Down 5.1% from the July 2007 peak

Last year at this time prices rose 1.1% month-over-month and year-over-year prices were up 8.6%.

The Seattle area’s month-over-month home price changes shrank slightly from May to June, but the year-over-year change held steady at pretty much exactly where it’s been since March.

Here’s a Tableau Public interactive graph of the year-over-year change for all twenty Case-Shiller-tracked cities. Check and un-check the boxes on the right to modify which cities are showing:

Seattle’s position for month-over-month changes fell from #6 in May to #9 in June.

Case-Shiller HPI: Month-to-Month

Hit the jump for the rest of our monthly Case-Shiller charts, including the interactive chart of raw index data for all 20 cities.

In June, five of the twenty Case-Shiller-tracked cities gained more year-over-year than Seattle (one more than in May):

  • Denver at +10.2%
  • San Francisco at +9.2%
  • Dallas at +8.2%
  • Portland at +7.8%
  • Miami at +7.7%

Fourteen cities gained less than Seattle as of June: Los Angeles, Las Vegas, Detroit, Atlanta, Tampa, Charlotte, San Diego, Phoenix, Minneapolis, Boston, Cleveland, New York, Washington, and Chicago.

Here’s the interactive chart of the raw HPI for all twenty cities through June.

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

Case-Shiller HPI: Decline From Peak

In the ninety-five months since the price peak in Seattle prices are down 5.1%.

Lastly, let’s see what month in the past Seattle’s current prices most compare to. As of May 2015, Seattle prices are approximately where they were in July 2006.

Case-Shiller: Seattle Home Price Index

Check back tomorrow for our monthly look at Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 2015-8-25)

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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.

46 comments:

  1. 1

    Historical Improvements Occurred Simultaneous to Interest Rate Cuts with QEs

    Now let’s see the cripple walk on its own without its rich elite welfare crutches.

  2. 2
    sleepless says:

    By softwarengineer @ 1:

    Historical Improvements Occurred Simultaneous to Interest Rate Cuts with QEs

    Now let’s see the cripple walk on its own without its rich elite welfare crutches.

    Of course the interest rates and QE have nothing to do with “improving” housing market. It is all “supply and demand”, high IT jobs and people wanting to live in Seattle all over the world… and dont forget the millennials, they got to live somewhere….
    /sarc
    The whole recovery was built on the FEDs attempt to reflate bubbles and the “wealth” effect.

  3. 3

    Don’t ignore fiscal policy too. The federal government still spending more money–although not as much as it was at the peak of the crisis. Roughly 8% more in constant dollars over 2008. (Over 17% in nominal dollars.) That has an impact.

    http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

  4. 4
    ess says:

    http://www.scmp.com/business/china-business/article/1838489/more-chinese-investors-consider-foreign-property-after-stock

    Apparently mainland Chinese are thinking more about investing in real estate overseas as a result of the economic turmoil in mainland China. Hopefully they will continue to invest in the Puget Sound area, and hopefully housing prices will continue to be strong. We shall see!

  5. 5
    Blurtman says:

    By Kary L. Krismer @ 3:

    Don’t ignore fiscal policy too. The federal government still spending more money–although not as much as it was at the peak of the crisis. Roughly 8% more in constant dollars over 2008. (Over 17% in nominal dollars.) That has an impact.

    http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

    Why does the USG need to issue debt in order to spend money?

  6. 6
    WestSeattleDave says:

    RE: Blurtman @ 5 – “Why does the USG need to issue debt in order to spend money?” Because nobody wants to pay taxes. “Tax” has become a four letter word. If you look at the table Kary links to from the TPC, you see that when measured as a % of GDP (which is the appropriate way to evaluate taxes/spending over time) spending has gone up from 19.1% to 20.3% between 2007 and 2014 (prior to the Great Recession to last fiscal year). Now you could argue that spending has increased over that time, and the problem is on the spending side. However, compared to other peer countries, this is a low number. On the revenue side, it has fallen from 17.9% (of GDP) to 17.5% over the same ’07-’14 period.

    At a time when we have been spending more money, we have been cutting taxes to pay for it. Hence, the borrowing.

  7. 7
    Blurtman says:

    By WestSeattleDave @ 6:

    RE: Blurtman @ 5 – ”

    At a time when we have been spending more money, we have been cutting taxes to pay for it. Hence, the borrowing.

    Fair enough but why must the USG issue debt in order to spend money? Even when taxes were paid, there was still debt issuance. No argument about falling tax payments, just a question about why the USG has to issue debt to spend money.

  8. 8
    WestSeattleDave says:

    RE: Blurtman @ 7 – Technically, they spend the money first, when they do the federal budget. Then, they borrow the difference between spending, and tax revenue as it flows into the treasury. As to why they issue debt, they have to pay for the spending somehow. The way to eliminate the borrowing is to either increase revenue or decrease spending (or a combination of the two). Debt is a function of that imbalance.

  9. 9
    Blurtman says:

    By WestSeattleDave @ 8:

    RE: Blurtman @ 7 – As to why they issue debt, they have to pay for the spending somehow.

    Yes, that is how the system works, but is that the only way it can work? Why cannot the government create money without the issuance of debt?

  10. 10
    Blurtman says:

    By WestSeattleDave @ 8:

    RE: Blurtman @ 7 – As to why they issue debt, they have to pay for the spending somehow.

    For example:

    2. A system of government issuance not only allows government to expand the money supply by increasing spending, but also to shrink it through tax increases as circumstances require. It also allows government to finance its deficits directly, by making the same accounting entries used by the banks from whom the government otherwise borrows the money at interest to cover its debts. This system gives enormous power to government and creates significant temptation for government to engage in inflationary overspending. It is a more rational system, however, than the current system in which private bankers inflate the money supply to finance speculation for purely private gain and collect interest from government for money that the government could just as well create for itself by making the same accounting entry the private banks make. Transparency and political accountability can constrain the risk of abuse, which is unlikely to be greater than in the current system.

    http://www.neweconomyworkinggroup.org/visions/living-wealth-money-system/money-system-design-options/debt-money-vs-government-issue-trad

  11. 11
    Rebecca says:

    RE: Blurtman @ 10 – I think I understand the crux of your confusion. The US government is not printing the money , a bank is. That bank is the Federal Reserve and despite the name it is not a government institution at all , it is a bank albeit one imbued with the considerable super powers to “print” money in an unlimited fashion and police its own monetary policies – presumably for the good of us all. Despite the implied condemnation of this practice as I’ve written it, the reason the government can’t print its own money is chalked up to the inherent conflict of interest that creates. For instance I think a lot of my ideas are bankable and I consider myself creditworthy, but I can’t print my own money to bring them to fruition and maybe its better that way, so I don’t have to awkwardly level late charges or foreclose on myself. As to why money is tied to debt – its the new gold standard basically. No one likes to think of it that way because its grossly uncomfortable once you accept that all money is a claim on future labor and that therefore all debt it a future claim on future labor. Basically banks “help” us kick the can down the road a little further, while charging us a premium for the convenience of doing so in the form of interest. It doesn’t matter too much to them , we’ll keep paying, and then our kids will, etc. etc. and eventually we will have satisfied the debt an then some. Its their business model, and boy oh boy does it work! (for them)

  12. 12
    Blurtman says:

    By Rebecca @ 11:

    RE: Blurtman @ 10 – I think I understand the crux of your confusion. The US government is not printing the money , a bank is. That bank is the Federal Reserve and despite the name it is not a government institution at all …

    I don’t know that I am confused. You are describing the system that is currently in place, as is WestSeattleDave. But there are other systems that are possible, such as the government issuance system described in post 10. The argument against this system is described in the post, but there are also plenty of arguments against the current system as well. I truly believe folks think that the current system is the only way things can be organized, in spite of all the problems with it, and that just ain’t so. It is not necessary to create debt to have money to spend. The government can do it without issuing debt.

  13. 13
    Rebecca says:

    RE: Blurtman @ 12 – oh so you’re question is why cant we get rid of the central banks and let the government replace them? see my conflict of interest point above, which was an echo of what your posted suggestion itself contained. But more importantly, what do you suppose it would take to get them to give up the very very good thing they’ve got going on? They are basically the modern equivalent of every king, emperor, god, over lord who ever lived or was imagined by man- non centralized all over the globe, and every politician on very “side” at the top levels might as well have puppet strings for veins. And the only thing most people are willing to do about it is watch t.v.

  14. 14
    Rebecca says:

    RE: Blurtman @ 12 – And I’m really not trolling your point. I’ve literally protested for the abolition of the fed on the streets of “liberal” Seattle and been called a communist for my trouble. It gets disheartening after a while, but you are absolutely right that there are better ways to go about things.

  15. 15
    ess says:

    http://www.cbc.ca/news/canada/british-columbia/vancouver-s-housing-2nd-least-affordable-in-world-1.2505524

    Think there are affordability problems in Seattle? Check out this article about our “friends to the north”.
    Now Vancouver BC is a city in which the average working stiff can’t afford to purchase a single family residence.

  16. 16
    Blurtman says:

    By Rebecca @ 14:

    RE: Blurtman @ 12 – And I’m really not trolling your point. I’ve literally protested for the abolition of the fed on the streets of “liberal” Seattle and been called a communist for my trouble. It gets disheartening after a while, but you are absolutely right that there are better ways to go about things.

    No problema. It is indeed troubling that institutions that have been granted the special privilege of creating money have engaged in horrendous crimes that have destroyed the lives of many. And it is clear the the Fed is a facilitator and why not? It’s cartel members have a very good thing going, and no one goes to jail. And Americans are subjected to constant cutbacks over concerns of unpayable debt that was never necessary to have been issued in the first place. This is the wringer that free people have been placed in.

  17. 17

    By Blurtman @ 9:

    By WestSeattleDave @ 8:

    RE: Blurtman @ 7 – As to why they issue debt, they have to pay for the spending somehow.

    Yes, that is how the system works, but is that the only way it can work? Why cannot the government create money without the issuance of debt?

    They can, and it will work fine—say the same people who think a $15 minimum wage will help people.

    Look at it this way. Imagine a famous artist is making prints of one of their pieces. If they say they will only make 100 prints those prints will sell for more than if they say they will only make 200 prints. If they don’t limit how many prints they will make the prints will sell for the lowest price.

    The value of money is based on scarcity. If a government’s policy is just to print more money whenever it wants to spend more money, that money will have a lower value.

  18. 18
    WestSeattleDave says:

    RE: Kary L. Krismer @ 17 – “Yes, that is how the system works, but is that the only way it can work? Why cannot the government create money without the issuance of debt?”

    There are other ways, but all of the industrial democracies (our peers) utilize central banking systems to manage their money. Governments can do so, but their track record is spotty, at best. Most of them fall under the heading of “Banana Republics”. Another way is to peg your currency to the dollar, which is done in Hong Kong, Saudi Arabia, and others. But you give up control to the US. You could peg your currency to gold, but nobody does that. And there are good reasons why we no longer do that.

    So we’re left with central banking. And although the Fed can “print” money, it generally does not. However, the common perception is that they do. But they generally manage the money supply by buying and selling securities in the market. They have the money to do so, without “printing” it. And when the money supply is increased to accommodate debt, keep in mind that this money is paid back through future earnings (Rebecca referred to “labor”, but the source of payback includes money from capital gains, dividends, etc.). “Printed” money has no such payback.

  19. 19
    Blurtman says:

    By Kary L. Krismer @ 17:

    By Blurtman @ 9:

    By WestSeattleDave @ 8:

    RE: Blurtman @ 7 – As to why they issue debt, they have to pay for the spending somehow.

    The value of money is based on scarcity.

    You seem to be taking up my argument that keeping a significant part of the working population unemployed will keep inflation at bay. But we have seen that there is a disconnect between the money supply and inflation under the current regime, and no reason to doubt that the same could happen under a system of government issuance.

  20. 20
    Blurtman says:

    By WestSeattleDave @ 18:

    RE: Kary L. Krismer @ 17 – “Yes, that is how the system works, but is that the only way it can work? Why cannot the government create money without the issuance of debt?”

    There are other ways, but all of the industrial democracies (our peers) utilize central banking systems to manage their money. Governments can do so, but their track record is spotty, at best. Most of them fall under the heading of “Banana Republics”. Another way is to peg your currency to the dollar, which is done in Hong Kong, Saudi Arabia, and others. But you give up control to the US. You could peg your currency to gold, but nobody does that. And there are good reasons why we no longer do that.

    So we’re left with central banking. And although the Fed can “print” money, it generally does not. However, the common perception is that they do. But they generally manage the money supply by buying and selling securities in the market. They have the money to do so, without “printing” it. And when the money supply is increased to accommodate debt, keep in mind that this money is paid back through future earnings (Rebecca referred to “labor”, but the source of payback includes money from capital gains, dividends, etc.). “Printed” money has no such payback.

    You seem to be defining the pre-central bank United States as a banana republic. The Fed keystrokes digital dollars into cartel members’ accounts and so does indeed print money. The Fed has unlimited money as it creates it out of nothingness. Cartel members also have the ability to create money out of nothingness, within limits of reserve ratios.

  21. 21
    WestSeattleDave says:

    RE: Blurtman @ 19 – It was not my intention to lump the US into the banana republic basket. But since you put it that way, I’ll address it. The Fed was created in December 1913, so since then it has been behaving in a responsible manner (as far as central banks go). Prior to that, any bank could print it’s own money. Many banks went out of business, leaving worthless paper dollars in their wake. Google “Bank Panic” for a good description of what I’m talking about. It wasn’t exactly a banana republic, but is sure was the wild west (literally and figuratively).

    I think creating money out of nothingness is greatly misunderstood. When banks loan money (create debt), they are creating an asset for themselves. This debt is paid back (most of the time) and the bank profits from the interest charged. The principle and interest returned to the bank (along with deposits) allow it to lend more. Again, the central bank is the only entity that can print money (which it seldom does). All banks can create debt, which is not the same as printing money.

  22. 22
    Rebecca says:

    RE: Blurtman @ 19 – Absolutely . The concept of printing money is a matter of semantics in this case. WestSeattleDave, I’m burning brain fuel at an alarming rate trying to figure out your capital gains/ dividends comment. Best I can come up with is that capital gains and dividends are based on an increase in value that is as nebulous in origin as debt in an equal and opposite way? …..just blew a fuse.

  23. 23
    WestSeattleDave says:

    RE: Rebecca @ 21 – The best definition of debt that I have heard is that it is “a claim on future earnings”. You had used the same language, except for substituting “labor” for earnings. When you say labor, I hear wages. And you can pay debt back with income other than wages. Capital gains, dividends, rents, etc. all generate earnings that are not labor income, that can be used for debt repayment. I think your use of labor was too narrow, as you can pay off debt with other income than labor.

    Your general point, however, was correct.

  24. 24
    Blurtman says:

    RE: WestSeattleDave @ 20 – Thanks for your perspective. The bank creates money out of nothingness when it creates a loan, within reserve requirements. It is lending what it does not have, irrespective of whether the loan is described as a paper asset or not. The created money is regarded as real by fellow cartel members who also agree to engage in the same activities, even though the bank does not possess the money it lends, but for reserve requirements, to purchase real physical assets like homes. I do not understand your distinction about printed money. No one is talking about actually printing currency. Creating money out of nothingness I regard as printing money.

    With regards to bank runs, they have occurred and still do (i.e., Greece) in spite of the existence of central banks. The recent financial crisis has been described as a run on the large investment banks. And of course, the Great Depression during the 1930’s and related bank runs also occurred during the existence of the Fed.

    Considering the incredibly large scale of financial crimes committed by the money creators, cartel members of the Fed, and the large scale harm done to average Americans, I find the argument that this current system is better to be potentially specious, and I believe that better alternatives can be found.

  25. 25
    Rebecca says:

    RE: WestSeattleDave @ 22 – well ok. Call it a minor difference of opinion but consider this. Money is a store of value. The value most often realized in exchange for money requires labor at some point. If its goods, its goods that were produced with labor. If the money is gained by some rise in value of a commodity, selling a house for more than you paid for it for example, that money will still likely be used to buy goods (produced with labor) or a service(labor) down the line in order for it to realize its value/potential . You could come up with an example where money is some how detached from labor at its origin, and unrealized as an exchange for labor in the future but it would be a statistical anomaly. Money can be generated without labor, but its “value” cannot be realized without it. I dunno, again just what I think.

  26. 26
    Rebecca says:

    RE: WestSeattleDave @ 22RE: Rebecca @ 24 – Oh and I realize now after re reading ,our disagreement really might not be one. I originally said that all MONEY is a claim on future labor. And DEBT therefore is a future claim on future labor because debt can only be repaid in money (at least that’s what my bank tells me when I try to send them cookies) And money really is a claim on future labor because money – the paper and electronic stuff – is only good for what you can buy with it not what you can do with the actual notes and numbers though I have made some cool origami on occasion. It might not be your labor that generates your wealth, but you can’t realize the value of that money without the labor of someone somewhere at some point in the future.

  27. 27
    whatsmyname says:

    RE: Blurtman @ 23
    “The bank creates money out of nothingness when it creates a loan, within reserve requirements. It is lending what it does not have, irrespective of whether the loan is described as a paper asset or not”

    I do not follow your meaning. If 10 posters each lend you a dollar, and you lend nine of those dollars to me, you have not created money out of nothingness. You have not lent me what you do not have.

  28. 28
    boater says:

    By whatsmyname @ 26:

    RE: Blurtman @ 23
    “The bank creates money out of nothingness when it creates a loan, within reserve requirements. It is lending what it does not have, irrespective of whether the loan is described as a paper asset or not”

    I do not follow your meaning. If 10 posters each lend you a dollar, and you lend nine of those dollars to me, you have not created money out of nothingness. You have not lent me what you do not have.

    I think he’s referring to fractional reserve banking if I remember right. In that case I am allowed to lend out n*X dollars for every X dollars I have as deposits (and other assets). This essentially creates dollars that were never printed. There’s another term in this all that impacts the money supply which is the velocity of money. That’s the “speed” with which money get’s passed along since money borrowed from Bank A can be deposited in Bank B to lend to Bank C assuming people are able to borrow. When the financial crisis hit that velocity dropped precipitously. The money supply contracted in effect because the lending standards tightened overnight. I think that’s part of the reason why the Fed has been able to do QE(1,2,3) without significant inflation. In 2007 you could say velocity was say 15. In 2009 it was 1. Now it’s probably back to 5 and rising would be my gut feel. That increase in velocity is in my mind why the Fed absolutely must raise interest rates even if they don’t want to. The US economy is doing just well enough for people to feel more comfortable lending again. That velocity can rise rapidly if the Fed isn’t proactive.

  29. 29
    whatsmyname says:

    RE: boater @ 27
    I am referring to fractional reserve banking as well. That’s why he borrows $10, but only lends me $9 – Just keeping the model simple. I am looking for how that “creates money out of nothingness”, which is a loaded, and I think misleading phrase. I am looking for how that is loaning what you don’t have.

    Velocity does impact the availability of money – which does affect the size of the economy. Question for you though, why would you feel an urgency to proactively stop the economy growing in our current circumstances? Are we looking for the lowest common denominator?

  30. 30
    boater says:

    RE: whatsmyname @ 28
    It seems like an appropriate phrase when a central bank can print 5 dollars but the economy can perceive and act like there is 50 dollars in the system. 45 dollars essentially came out of thin air by the act of borrowing it and moving it to a separate bank multiple times.

    And this is coming from someone who is fine with fiat currency and fractional reserve banking. This system is sensitive in a different way than say a gold standard system without FRB is.

  31. 31
    whatsmyname says:

    By boater @ 29:

    RE: whatsmyname @ 28
    It seems like an appropriate phrase when a central bank can print 5 dollars but the economy can perceive and act like there is 50 dollars in the system. 45 dollars essentially came out of thin air by the act of borrowing it and moving it to a separate bank multiple times.

    1. We are not talking about the money that the Fed prints. (although they can print to lend money to banks who are short on their reserve). 2. Looking at the example that I cite, where is the “created money”? You repeat this meme without explaining what it is. 3. Do people just move all the money they borrow to another bank? This is why I used the example that I did. How does this realistically scaled (10%) scenario result in the tenfold increase you imagine?

  32. 32
    Blurtman says:

    By whatsmyname @ 26:

    RE: Blurtman @ 23
    “The bank creates money out of nothingness when it creates a loan, within reserve requirements. It is lending what it does not have, irrespective of whether the loan is described as a paper asset or not”

    I do not follow your meaning. If 10 posters each lend you a dollar, and you lend nine of those dollars to me, you have not created money out of nothingness. You have not lent me what you do not have.

    If a poster had only 10 cents, but lent me 100 cents, he would have created 90 cents out of thin air. I’d go along with the scheme if I could do the same. Of course neither I or the poster could do that, too bad. But banks can.

  33. 33
    boater says:

    RE: whatsmyname @ 30
    The money is created because the depositor in theory can still withdraw all his money at any time.

    So i deposit $100 in Bank A. It lends $80 to another person who deposits it in bank B. Bank B can now lend some fraction of that $80. But at each bank along the way the depositor can legally still get his full amount at any time. While the actual physical dollars in the system might be fixed it’s largely a probability game of how likely is it that withdrawal will exceed the collective banks ability to loan each other enough money to cover withdrawals exceeding deposits at any given time.

    Created might be the wrong word.

  34. 34
    Blurtman says:

    By boater @ 32:

    RE: whatsmyname @ 30
    The money is created because the depositor in theory can still withdraw all his money at any time.

    So i deposit $100 in Bank A. It lends $80 to another person who deposits it in bank B. Bank B can now lend some fraction of that $80. But at each bank along the way the depositor can legally still get his full amount at any time. While the actual physical dollars in the system might be fixed it’s largely a probability game of how likely is it that withdrawal will exceed the collective banks ability to loan each other enough money to cover withdrawals exceeding deposits at any given time.

    Created might be the wrong word.

    And so if every depositor demanded his money back, the Ponzi would fold. This is a definition of a bank run.

    It is clear that most people do not understand what fractional reserve lending means and what it actually does, and for good reason. It seems quite illogical. For a quick primer, the giver of all knowledge, Wiki, might be helpful. Note that in the example described mid-page, $100 dollars on deposit becomes an additional $400 under a 20% reserve ratio requirement. That is, $400 were created out of thin air by the banks. This seems to be a very special privilege that should not be endowed to felons.

    https://en.wikipedia.org/wiki/Fractional-reserve_banking

    And so when you take out a loan to buy a house, the bank actually does not have the money it lends to you. Why would the seller accept your bogus check? Because his bank where he deposits the check is also a cartel member, and can play by the same rules.

  35. 35
    whatsmyname says:

    By Blurtman @ 31:

    If a poster had only 10 cents, but lent me 100 cents, he would have created 90 cents out of thin air. I’d go along with the scheme if I could do the same. Of course neither I or the poster could do that, too bad. But banks can.

    That is not fractional reserve lending, and banks cannot do that. You are misinformed.

  36. 36
    whatsmyname says:

    RE: boater @ 32 – Going back to the example cited, any or all of the posters could ask Blurtman for their $1 back at any time. If Blurtman is short, they would have a claim on Blurtman’s other assets, including his $9 loan to me. Where is the created money?

  37. 37
    whatsmyname says:

    RE: Blurtman @ 33
    People do not take out bank loans to deposit the funds in another bank. The wiki chart is a bit like saying that a manufacturer with a $100 sale and a 20% margin created $457 of spending out of nothingness on the presumption that all of his suppliers are a chain of 20% margin producers, extending the chain to exhaust the theoretical margin, and consolidating all the funds spent at each step of the chain.

    Your problem is not with fractional reserve lending, but with consumer banking. If the deposits that a bank lends out is money they don’t have (because of a theoretical compounding of deposits), then the money you are depositing is money you don’t have – because it is the same money. So look; you do get to play after all.

  38. 38
    Blurtman says:

    RE: whatsmyname @ 34 – Well, I was trying to work within a faulty analogy that was proposed.

    So here is a better scenario.

    You deposit $100,000. Let’s say you actually deposit 1,000 x $100 dollar bills. Your bank keeps $10,000 of the dollars you gave them, and loans someone else $90,000 of your money.
    – That person deposits $90,000 Their bank loans someone else $81,000
    – That person deposits $81,000 Their bank loans someone else $72,900
    – That person deposits $72,900 Their bank loans someone else $65,610
    – That person deposits $65,610 Their bank loans someone else $59,049
    – That person deposits $59,049 Their bank loans someone else $53,144
    – That person deposits $53,144 Their bank loans someone else $47,829
    – And so on

    Really only $100,000 actually exists. The same money is continually lent again and again and again, minus 10%, until $900,000 of fictional money has been created with a 10 percent reserve requirement.

    – Total Money Created = Initial Deposit x (1 / Reserve Requirement)

    For example, with the numbers we have used above, the equation would look like this:

    – $1,000,000 = $100,000 x (1 / 0.10)

    Your bank does not have your $100,000. Nor does the bank that was lent $90,000 of your your money.

    And so banks do create money. Banks do lend what they do not have. And felons should not be granted this privilege.

  39. 39
    Rebecca says:

    RE: whatsmyname @ 34 – Nope. Blurtman is absolutely correct. You might have missed something in your independent research on the subject. Seems we are at an impasse. I understand it the way that Blurtman does too. Either we are wrong or you are. In any case I’ve studies this issue many times and keep coming up with the same conclusion. Perhaps its uncomfortable to think of money as being “created” or “printed” by any one entity,group,institution,consortium etc. But money, in any amount is created. Its not a resource dug up from the Earth or planted in the soil. And yes, we have rules about who,how,when and where its made, but it is MADE in some fashion and the rules regarding the above are very strange. They exist outside of nature, logic, reason. And yet, to some extent we all must live by them.

  40. 40
    whatsmyname says:

    RE: Blurtman @ 37
    Still trying to run before you can crawl. You never did address the analogy I proposed. You have never explained why it is faulty – or why it can’t be answered directly on its own terms. I still challenge you to do so.

    Correcting the 20% wiki model for the 10% current reserve requirement is an improvement on detail, but it pales in comparison to your logic failure in the perpetual chain of bank deposits. That doesn’t happen in the real world. That is a theoretical model to show the tendency to create more availability to the money. To the limited degree that it happens, you are right (to my point) that only the $100,000 exists. It is the number and prioritization of claims to that money that has changed. Each are well documented. If that feels like more money, (and it does), that is a systemic phenomena. No one player (lender) “creates” that more than another (depositor). In fact, a depositor is a lender – to the bank. Sorry, not magic, and not fraud.

    Also, I like your broad brush that bankers = felons. It reminds me of something, something historical. If only I could put my finger on it.

  41. 41
    boater says:

    RE: whatsmyname @ 40
    Just so im clear, you’re asserting that fractional reserve banking doesn’t increase the money supply right?

  42. 42
    Blurtman says:

    By whatsmyname @ 40:

    RE: Blurtman @ 37
    Still trying to run before you can crawl. You never did address the analogy I proposed. You have never explained why it is faulty – or why it can’t be answered directly on its own terms. I still challenge you to do so.

    Correcting the 20% wiki model for the 10% current reserve requirement is an improvement on detail, but it pales in comparison to your logic failure in the perpetual chain of bank deposits. That doesn’t happen in the real world. That is a theoretical model to show the tendency to create more availability to the money. To the limited degree that it happens, you are right (to my point) that only the $100,000 exists. It is the number and prioritization of claims to that money that has changed. Each are well documented. If that feels like more money, (and it does), that is a systemic phenomena. No one player (lender) “creates” that more than another (depositor). In fact, a depositor is a lender – to the bank. Sorry, not magic, and not fraud.

    Also, I like your broad brush that bankers = felons. It reminds me of something, something historical. If only I could put my finger on it.

    I am glad that records are kept, and prioritizations noted, but that is all red herring stuff. Banks do create money out of nothing. All of the major banks have committed serial frauds. And felons should not have the ability to create money. What is being made “available” does not exist.

  43. 43
    WestSeattleDave says:

    RE: Blurtman @ 42 – So Blurtman – it seems that you are quite down on the Federal Reserve and the way they control the money supply. What is your suggestion as a replacement?

  44. 44
    whatsmyname says:

    By boater @ 41:

    RE: whatsmyname @ 40
    Just so im clear, you’re asserting that fractional reserve banking doesn’t increase the money supply right?

    Not exactly. I’m saying that money isn’t created from nothing through lending. New assets and liabilities are matched, so the change in wealth occurs over time through earned interest and credit losses, and not through the immediate transaction. It is true that the M-1 and M-2 statistics definitionally include demand deposits, (just as they don’t include loan assets, vault cash or reserves). But people don’t borrow at bank rates to “invest” in essentially nonpaying DDA for the most part – so most of this dissipates pretty quickly after loan funding.

    Moreover, if there is already surplus DDA cushion relative to borrowing demand or misc. constraints on lending, the bank’s lending doesn’t grow by the marginal potential of new DDA in the first degree, and may not grow at all; let alone under the fictional chain of nesting loans to DDA conversions.

  45. 45
    whatsmyname says:

    By Blurtman @ 42:

    I am glad that records are kept, and prioritizations noted, but that is all red herring stuff. Banks do create money out of nothing. All of the major banks have committed serial frauds. And felons should not have the ability to create money. What is being made “available” does not exist.

    I would like to take you out to lunch, but since my mortgage liability exceeds my cash on hand, my money doesn’t seem to exist. Maybe you would take me instead?

  46. 46
    Blake says:

    Sorry I misse dmost of this discussion, but it is key to understanding our dilemma. Boater had it right pointing out that the private banks create money by deciding to make loans via their rights under the fractional reserve banking system. So it is really private decisions by bankers/lenders and borrowers to increase the money supply.
    Here’s an excellent short primer on our “privatized money supply”:
    http://www.basicincome.com/basic_banks.htm

    After the credit crisis of 2007-8, the Federal reserve realized that we may face another depression as consumers retrench and debts are not paid off, so they tried to goose the system with easy money. Unfortunately this has not worked out, as banks did what the Japanese banks did 20 years ago and decided to tighten credit and slowly repair their balance sheets. You can see here how the money supply (m1 and M2) has not recovered:
    http://www.economicgreenfield.com/2015/01/30/velocity-of-money-charts-updated-through-january-30-2015/
    This is David Stockman and others have been saying for years that this was going to fail and just lead to asset inflation and speculation and indeed the speculators and investment banks have had access to 0% money to speculate and buy land, stocks, commodities… while main street gets crumbs.

    It’s all coming crashing down again (surprised!?)… and they are too big to fail, so Uncle Sam will bail them out and leave us with the bill. Oh, but we have an election coming up and that will change everything! ;-)

    “It is an old maxim and a very sound one, that he that dances should always pay the fiddler…. These capitalists generally act harmoniously, and in concert, to fleece the people, and now, that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.” – Abraham Lincoln, 11 January 1837

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