The Worst Recovery Ever

[The Rabbi]

5 years ago, housing was over-valued, due to the "housing bubble". Since then, the housing market has "corrected", and now housing prices reflect reasoned reality. How can Pres. Obama be blamed, for a housing bubble, years before he took office?

If you want to impugn some policies (e.g. arguably ineffective "Fiscal Stimulus", in the form of huge government deficits), then arguable facts & numbers should not be mixed, with blame-game "griping" about the aftermath of 2008. Should Pres. Obama create another housing bubble, to inflate home prices?? (Did Democrats secretly sabotage the US economy, helping generate the housing bubble in 2006, to undermine Republicans, and get a Democrat elected in 2008, or something??)

A house is worth what someone is willing to pay for it. So there is no over valuing or undervaluing.

Umm interest rates and no collateral, etc loans have a bit to do with housing prices.

Umm, you're right but so what?

 

[Moonglow]

how long was the recession not suppost to last?

 

[uscitizen]

According to the "experts" it was to be just a 6 months adjustment and then go back to where it was.

 

[Widdekind]

A house is worth what someone is willing to pay for it. So there is no over valuing or undervaluing.

... interest rates and no collateral, etc loans have a bit to do with housing prices.

Prices reflect willingness ("demand") and ability ("demand with money") to pay. Low interest rates make credit cheap. People borrow more than they otherwise would, and bid up the prices, as more money (augmented by borrowing) chases fewer products (houses). And, when rising prices can actually fuel further demand-with-borrowed-money, due to speculation, then a "self-fulfilling cycle" occurs, wherein rising prices attract more buyers, inflating prices, etc.

Eventually, prices inflate to the point, where everybody recognizes that the products (houses) cannot possibly be worth what sellers are asking. Then prices plummet, as everybody tries to sell, to earn back what money they can, to pay back the banks. Over-valuing can occur, when speculation occurs, as the demand-with-money ("demand") for the product (house) no longer represents demand purely for that product; but also speculative demand, due to past price history (rising prices):

bubble price = (demand for house) + (demand for speculative profit)

corrected price = (demand for house)​

Easy credit, fueling speculation, inflates prices beyond "normal" market forces. Speculative psychology can dominate rational market forces. When "irrational exuberance" develops, dominated market forces no longer reflect real product prices.

Pres. Obama was not yet President (2008), when easy credit fueled speculation, on US housing markets (2006). Arguably, Pres. Obama can only be judged, on how he handled the crisis, which he inherited. Arguably, government deficit spending has failed to "stimulate" economic recovery. Arguably, more-of-the-same government deficit spending would continue to fail to "cure" the economy. Past successes (highways, internet) are non-relevant, to present circumstances (unless they be good guides, for brainstorming "the next internet" Public program).

 

[Jroc]

A house is worth what someone is willing to pay for it. So there is no over valuing or undervaluing.

... interest rates and no collateral, etc loans have a bit to do with housing prices.

Prices reflect willingness ("demand") and ability ("demand with money") to pay. Low interest rates make credit cheap. People borrow more than they otherwise would, and bid up the prices, as more money (augmented by borrowing) chases fewer products (houses). And, when rising prices can actually fuel further demand-with-borrowed-money, due to speculation, then a "self-fulfilling cycle" occurs, wherein rising prices attract more buyers, inflating prices, etc.

Eventually, prices inflate to the point, where everybody recognizes that the products (houses) cannot possibly be worth what sellers are asking. Then prices plummet, as everybody tries to sell, to earn back what money they can, to pay back the banks. Over-valuing can occur, when speculation occurs, as the demand-with-money ("demand") for the product (house) no longer represents demand purely for that product; but also speculative demand, due to past price history (rising prices):

bubble price = (demand for house) + (demand for speculative profit)

corrected price = (demand for house)​

Easy credit, fueling speculation, inflates prices beyond "normal" market forces. Speculative psychology can dominate rational market forces. When "irrational exuberance" develops, dominated market forces no longer reflect real product prices.

Pres. Obama was not yet President (2008), when easy credit fueled speculation, on US housing markets (2006). Arguably, Pres. Obama can only be judged, on how he handled the crisis, which he inherited. Arguably, government deficit spending has failed to "stimulate" economic recovery. Arguably, more-of-the-same government deficit spending would continue to fail to "cure" the economy. Past successes (highways, internet) are non-relevant, to present circumstances (unless they be good guides, for brainstorming "the next internet" Public program).

Government screwed up "Normal market forces" Obama wants more and more government to fix what the government screwed up...

[ame=http://www.youtube.com/watch?v=P1sGN6J9Tgs]President Ronald Reagan- Government is the problem. - YouTube[/ame]

 

[The Rabbi]

how long was the recession not suppost to last?

Well the longest recession post war was 1yr 4 months. This one officially lasted 1 yr 6 moths and unofficially never ended, making it 3 years+. That's what happens when an incompetent simp like Obama gets into office. The worst president since Baby Doc.

 

[william the wie]

5 years ago, housing was over-valued, due to the "housing bubble". Since then, the housing market has "corrected", and now housing prices reflect reasoned reality. How can Pres. Obama be blamed, for a housing bubble, years before he took office?

If you want to impugn some policies (e.g. arguably ineffective "Fiscal Stimulus", in the form of huge government deficits), then arguable facts & numbers should not be mixed, with blame-game "griping" about the aftermath of 2008. Should Pres. Obama create another housing bubble, to inflate home prices?? (Did Democrats secretly sabotage the US economy, helping generate the housing bubble in 2006, to undermine Republicans, and get a Democrat elected in 2008, or something??)

A house is worth what someone is willing to pay for it. So there is no over valuing or undervaluing.

Umm interest rates and no collateral, etc loans have a bit to do with housing prices.

With money back at closing and no recourse loans were all of those houses actually purchased? I would ask Toro if he was posting on this thread but that sure walks and talks like a positive carry call option on the housing market to me, for that matter 0-5% collateral mortgages sure sound like call options to me as well.

 

[Widdekind]

0-5% collateral mortgages sure sound like call options to me as well.

banks (lenders) and homebuyers (borrowers) were speculating on housing prices. But they were directly buying & selling the asset (house), not derivatives on the asset. i don't understand your analogy -- a "call" option allows people to buy an asset (on some specific date) at a fixed price, presumably below the current market price -- and then immediately re-sell the same, making the margin, in profit. But in the housing bubble, nobody was buying artificially-low, and selling at current-and-higher market values. Instead, they were buying houses, waiting, and selling. The housing bubble was "direct speculation" (buying the underlying asset itself), not "indirect speculation" (buying derivatives on the asset).

 

[william the wie]

There is generally a 6.5% brokerage fee for selling a house.

With two years of teaser rate rent> was greater than carrying costs.

If you run the Black & Scholes numbers 11.5% (brokerage fee and 5% down payment) is undervaluation of a two year real estate option given the price history of MA, NY and CA as of say June 2005. It was such an undervaluation that normal real estate options were unavailable in hot markets and certainly not at an annualized rate of 5.59% of value.

 

[regent]

There is no manual on how to cure recessions or depressions, so far our only course of action is experimentation. Pehaps there is no cure, perhaps our manufacturing is coming to an end, as is some of our resources? Nations with cheap labor can buy new modern machinery and with their cheap labor simply out-price us. We can invent new products but cannot keep them a secret. Perhaps the Republicans are right, America has to go back to a two class system, upper and lower with a small middle class.

 

[The Rabbi]

There is no manual on how to cure recessions or depressions, so far our only course of action is experimentation. Pehaps there is no cure, perhaps our manufacturing is coming to an end, as is some of our resources? Nations with cheap labor can buy new modern machinery and with their cheap labor simply out-price us. We can invent new products but cannot keep them a secret. Perhaps the Republicans are right, America has to go back to a two class system, upper and lower with a small middle class.

Perhaps you're an idiot. OK, there is no perhaps there at all.

 

[regent]

There is no manual on how to cure recessions or depressions, so far our only course of action is experimentation. Pehaps there is no cure, perhaps our manufacturing is coming to an end, as is some of our resources? Nations with cheap labor can buy new modern machinery and with their cheap labor simply out-price us. We can invent new products but cannot keep them a secret. Perhaps the Republicans are right, America has to go back to a two class system, upper and lower with a small middle class.

Perhaps you're an idiot. OK, there is no perhaps there at all.

Perhaps if you responded to the parts of my post you disagree it might be more useful than simple name calling?
Is there a manual written for the cure or prevention of business cycles?
Can nations with cheap labor produce products cheaper than the US?
Is the goal of the Republican party to increase or decrease the size and power of the American middle class?

 

[william the wie]

Perhaps if you responded to the parts of my post you disagree it might be more useful than simple name calling?
Is there a manual written for the cure or prevention of business cycles?

Try Leon Juglar free in ebook form from Amazon. Discoveries of economies are made by somebody (ies) running off a cliff. In an established industry the survivors know where the cliff is and avoid it. When new industries dominate the economy as now, 100- 110 years ago or in the 1920s it gets really rough from mapping the territory.

Can nations with cheap labor produce products cheaper than the US?
Is the goal of the Republican party to increase or decrease the size and power of the American middle class?

Neither, the GOP is trying to avoid the blast zone of the Ds self destructing through municipal bankruptcies and state defaults.

 

[Widdekind]

There is generally a 6.5% brokerage fee for selling a house.

With two years of teaser rate rent> was greater than carrying costs.

If you run the Black & Scholes numbers 11.5% (brokerage fee and 5% down payment) is undervaluation of a two year real estate option given the price history of MA, NY and CA as of say June 2005. It was such an undervaluation that normal real estate options were unavailable in hot markets and certainly not at an annualized rate of 5.59% of value.

so, even paying 5% of "some" today; and then 6.5% of "more" tomorrow; living in a home for two years, was still cheaper than renting an apartment? i understand, that easy credit made homes near "giveaways". i don't understand, the analogy to derivatives on assets. Buying derivatives is "indirect speculation" (not buying the underlying asset, "standing aside and watching the price move"); buying a house is "direct speculation" (buying the underlying asset itself, "jumping in and hoping the price moves"). Do i mis-perceive a distinction ?

 

[Papageorgio]

Recovery? This ain't no stinkin recovery.
This is but a level pause on the stairsteps downward.

This is the Uscitizen I like to see. It's nice to see there are liberals and conservatives out there that can be honest and not blindingly partisan.

What we are seeing is what happened under Hoover and FDR during the great depression. Massive programs that never even come close to living up to the claims Presidents make. Cost the nation shit tons of money, create massive welfare and dependency but when falling short of even the most “worst case scenarios” we get, “It could have been worse without the program.”

This is where dishonest people start dragging Bush into this as if he was some sort of small Government conservative despite the massive welfare programs and wars he did.

I been saying for a decade this was coming and when it hit it would last at least a decade.
Longer if we don't get our collective heads out of our butts.

I agree, I actually predicted this in the mid 90's, surprised it didn't collapse after 9-11, I hope we recover quicker.

 

[william the wie]

There is generally a 6.5% brokerage fee for selling a house.

With two years of teaser rate rent> was greater than carrying costs.

If you run the Black & Scholes numbers 11.5% (brokerage fee and 5% down payment) is undervaluation of a two year real estate option given the price history of MA, NY and CA as of say June 2005. It was such an undervaluation that normal real estate options were unavailable in hot markets and certainly not at an annualized rate of 5.59% of value.

so, even paying 5% of "some" today; and then 6.5% of "more" tomorrow; living in a home for two years, was still cheaper than renting an apartment? i understand, that easy credit made homes near "giveaways". i don't understand, the analogy to derivatives on assets. Buying derivatives is "indirect speculation" (not buying the underlying asset, "standing aside and watching the price move"); buying a house is "direct speculation" (buying the underlying asset itself, "jumping in and hoping the price moves"). Do i mis-perceive a distinction ?

You are forgetting the non-recourse loans that made the speculation effectively indirect.

 

[Jroc]

There is no manual on how to cure recessions or depressions, so far our only course of action is experimentation. Pehaps there is no cure, perhaps our manufacturing is coming to an end, as is some of our resources? Nations with cheap labor can buy new modern machinery and with their cheap labor simply out-price us. We can invent new products but cannot keep them a secret. Perhaps the Republicans are right, America has to go back to a two class system, upper and lower with a small middle class.

Perhaps you're an idiot. OK, there is no perhaps there at all.

Perhaps if you responded to the parts of my post you disagree it might be more useful than simple name calling?
Is there a manual written for the cure or prevention of business cycles?
Can nations with cheap labor produce products cheaper than the US?
Is the goal of the Republican party to increase or decrease the size and power of the American middle class?

The goal of conservatives is to promote free market capitalism, the system which has raised more people from poverty than any other system in the history of the world. All people want liberty in the end, collectivism is a failure. Of course there are plenty of fake ass conservative, big government Republicans. who screw things up with the libs

 

[regent]

Perhaps you're an idiot. OK, there is no perhaps there at all.

Perhaps if you responded to the parts of my post you disagree it might be more useful than simple name calling?
Is there a manual written for the cure or prevention of business cycles?
Can nations with cheap labor produce products cheaper than the US?
Is the goal of the Republican party to increase or decrease the size and power of the American middle class?

The goal of conservatives is to promote free market capitalism, the system which has raised more people from poverty than any other system in the history of the world. All people want liberty in the end, collectivism is a failure. Of course there are plenty of fake ass conservative, big government Republicans. who screw things up with the libs

Rather than ask you to define free market capitalism perhaps you could name a few of the nations that have free market capitalism? Has the United States ever had FMC, if so when?

 

[boedicca]

Recovery? This ain't no stinkin recovery.
This is but a level pause on the stairsteps downward.

Unfortunately this is true.
Anyone watching the talking heads on the MSM in the past few months will have noticed a change in the economic discussions no matter the channel - everyone agrees the cards are bending and the house is eventually going to fall.
I have noticed this myself. It isn't just the Celentes and Schiffs talking about a serious downturn - they all are.
The only thing they are disagreeing on is what the government needs to do/not do to alleviate the fall or what to do afterwords. What changes to make in a thoroughly corrupt financial system, how to hold the government responsible etc.

I just want it to happen so it gets over with.
I am 47 years old. I don't want to still be doing business in a lousy environment 10 years from now. Let's get it over with for Pete's sake.

We need to privatize Social Security and Medicare really quick!

It worked for Chile.

Let's try it and skip the Communist/Military Junta phases.

 

[william the wie]

It worked for Chile.

Let's try it and skip the Communist/Military Junta phases.

Judging by normal behavior worldwide I would say you are dealing with a fantasy. It takes a huge shock to reach major changes.