Tiny Green Grasshopper
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@Cory:
No, no, I don’t think you made a mistake at all. I thought the exact same thing you did back in 2008. Any glance at a Case-Schiller graph made an iron-solid case that housing had peaked and had a long way down to go. Any glance at a Case-Schiller graph today makes an iron-solid case that housing has been manipulated, pumped, and huffed-and-puffed to a fake price “bottom” far higher than the real thing back in the 90’s.What it is is, you and millions of other people who believed the market was actually free, have been punked. (Many of these people are savvy investors. Karl Denninger’s one– that’s why he’s so P.O.’d all the time.)
Furthermore, it appears the PTB are trying to turn us all into a nation of renters. And what the Forbes guy failed to mention in his rosy “renting is good” essay and you did in your post, is that landlords will raise the rent, year after year, as high as the market (not necessarily you) can bear. It used to be that a lot of rentals were owned by Mom-and-Pop, who if they liked you would have mercy on you viz rent increases. Now, more and more rentals are owned en masse by large corporations, who bought them as foreclosures from the banks a couple years ago, and these corporations will squeeze their renters for every penny they can get. See Charles Hugh Smith’s essay.
We are pointed down the road to becoming a nation of rent-serfs, squeezed to the max for everything we need to live, and never having the margin to save up money at all. There is no middle class in such a scenario.
Hi, Ilargi:
Thanks for all you do. I’ve learned a ton from reading you and other economic bloggers. I Paypal’d you some money to help out with the computer; hope that situation settles out for you.Commenting on this column– every time I see something about all the debt it seems to scream to me, “Jubilee!” As in the Biblical jubilee, in which “all debts are forgiven” every 50 years. I’m not sure “all” debts would be practical to forgive, however. Some amount of people’s 401(K)’s are based on debt. I wonder, how much and which debt?
On the other hand, how much of the insane debt you describe above is notional, existing only on the balance sheet of one of the Five Banks of the Apocalypse* or the Fed? For example, the Fed has possession of a significant amount of Treasuries. The FBotA have most of the derivatives (according to this) Who has possession of the MBS? And so on.
Suppose a dictator popped out of the woodwork and took over the U.S., and nationalized the FBotA and the Fed. Would it be unreasonable, or destructive, for this hypothetical dictator to say, “OK, we have all these derivatives in our possession– we are now going to make them disappear. We have all these Treasuries in our possession– we will make them disappear too. (Don’t worry, if you are not one of the FBotA or the Fed, we will still honor your Treasuries.) We have all these mortgages in our possession. We will write them down to balances, based on the incomes of the borrowers, that they can pay with a 30-year fixed mortgage. It’s jubilee time– time to kill off some debt!”
Would this dictatorial debt-slaying spree help or destroy the financial world? What do you think?
* Chase, Citi, BofA, Wells, and, of course, the Vampire Squid, Goldman Sachs
