Congress Approves Housing Rescue Build

Oh, and yes: wrecking the farm economy really screwed Zimbabwe up: that appears to have been the proximate cause that forced them into money printing.

Our variety is different: we issue money into the marketplace, and then banks and hedge funds leverage it up enormously. There are hundreds of trillions of dollars in derivatives trading around, and in many cases, they trade like, look like, and even smell like "real" dollars. And if their models start to break down and things go pear-shaped, the Fed jumps in to make everything well. By guaranteeing marketplace liquidity, they ensure the continued expansion of the ersatz derivative currencies and the wild inflationary effects.

We're not, in other words, directly printing that many dollars. Rather, we're ensuring that dollar substitutes can't fail, so the overall effect is pretty much the same... except that we don't even get the benefit of printing the money. That goes to the banks and hedge funds. Inflation is normally a big temporary advantage for the government involved, but we've outsourced that. We keep only the pain, while the banks keep all the profit.

It's accidental, btw. I don't think the Fed truly understands what's going on. At each step, everyone involved in our government is doing what they think is the best possible thing. They're convinced that Wall Street's health is required for economic health. Over the short term, this is true, and that's as far as most of them can see. But over the long term, they're destroying us with their (mostly) good intentions.

Overall global inflation, as defined by the expansion of the giant global pool of money, appears to be running in excess of 12% anyway, and many smaller countries are reporting double-digit inflation figures. (they can't afford in-house statisticians to massage away all that nasty truth, you see.) So 14% annualized isn't as outlandish as it might first sound. But I just don't think it'll fall apart THAT fast. Economics is slow. I reacted to Nos' comment off the cuff instead of thinking it through.

Except that inflation is measured by consumer prices, since it represents the effects of goods supply and demand in the short run (year or so horizon). The monetary stuff has a longer run effect. The Economist noted that inflation hit a high last Fall, at 4.8% globally. Not 12% or 14%. Money supply growth or decline alone is not a useful measure of inflation. And bear in mind that high is in a time of financial crisis - it's not sustained, globally.

The rest of it, you've left even the Austrian School guys well behind, I can't really speak to that.

Oh, and yes: wrecking the farm economy really screwed Zimbabwe up: that appears to have been the proximate cause that forced them into money printing.

I'd say corruption and malfeasance plays a huge part.

It's accidental, btw. I don't think the Fed truly understands what's going on. At each step, everyone involved in our government is doing what they think is the best possible thing. They're convinced that Wall Street's health is required for economic health. Over the short term, this is true, and that's as far as most of them can see. But over the long term, they're destroying us with their (mostly) good intentions.

I'll just note that you've argued vehemently that the Fed knew exactly what it was doing - it had just chosen the wrong methods (a fiat money monetary framework) to achieve a stable economy. Now, you're arguing that they literally don't understand the effects of their actions. It's a new wrinkle, I guess.

The Fed was trying to maintain a stable economy by the measures they knew about: pricing, the stock market, and wages. They started inflating the money supply to combat the deflationary effects of globalization, and when that additional money started setting off bubbles, they embraced and even cheered them, apparently believing that the gains were real. Then, when the bubbles started popping, they got more and more interventionist, believing (correctly) that if they didn't, there would be widespread economic ramifications.

But the damage happened EARLIER, when too much money was available. We built the wrong things, having been given the wrong signals by a falsified money supply. Then, when the economic truth started to hit, the fact that we DIDN'T need the things we built, the Fed intervened, propped things up, and started another round of building more wrong stuff. After the Y2K bubble pop and intervention, we went into this wild overload of debt accumulation, house price increases, and massive derivative issuance... and now that those games are ending, now that we've taken even MORE damage, the Fed is intervening once again, preventing the economy from adjusting. They refuse to let the markets clear.

At each step, with each intervention, meaning well... they make the problem worse. We're on drugs, and every time we start to go into withdrawal, the 'doctor' prescribes more drugs. They're treating symptoms, not causes, and the treatments produce more of the same symptom later on.

Like I said before, if Alan Greenspan personally visited your home and burned half your stuff, it would do less damage to you than he's already done.

We do not understand economics. We can't manage what we don't understand. That's why central planning and central intervention is always a bad idea. Regulate, absolutely. Manage for specific outcomes... bad idea. By forcing a specific outcome (in this case, price stability), you cause side effects in virtually every other area. One side effect, of many others, is the fundamental expectation that because things have been stable for fifteen years, they'll be stable forever, and when things break, the government is supposed to step in and 'fix' them. This causes yet more damage, which the government is supposed to then 'fix' a few years later. Gradually, the economy slides into complete disrepair, unable to adjust itself because of the central planning. It didn't work for the Politburo, and it's not going to work for us, but that's the path we're choosing.

Free markets have to be free to go down, or they don't work. Destruction is a key component of capitalism, and by not allowing that, we're killing ourselves.

Robear wrote:
Overall global inflation, as defined by the expansion of the giant global pool of money, appears to be running in excess of 12% anyway, and many smaller countries are reporting double-digit inflation figures. (they can't afford in-house statisticians to massage away all that nasty truth, you see.) So 14% annualized isn't as outlandish as it might first sound. But I just don't think it'll fall apart THAT fast. Economics is slow. I reacted to Nos' comment off the cuff instead of thinking it through.

Except that inflation is measured by consumer prices, since it represents the effects of goods supply and demand in the short run (year or so horizon). The monetary stuff has a longer run effect. The Economist noted that inflation hit a high last Fall, at 4.8% globally. Not 12% or 14%. Money supply growth or decline alone is not a useful measure of inflation. And bear in mind that high is in a time of financial crisis - it's not sustained, globally.

The rest of it, you've left even the Austrian School guys well behind, I can't really speak to that.

India is throwing around 12%-ish numbers.

Another list, but note the caveat at the end of the description:

Although our "official" inflation rate is below the majority of the countries we analyzed, prices here are higher than major countries like France, Germany, the UK, Canada and Japan.

Pakistan is throwing around numbers like 20%.

China's official numbers are at 7%.

Thailand is sharply increasing their inflation outlook from 5% to 8%.

Malor's numbers are not out of the ballpark, especially given the current pressure to show good numbers in the face of economic problems.

Well, there's a big gap between 4.8% and 14%. That's what I'm pointing out (and I believe Malor acknowledged that). There's also the underlying assumption that this is a *normal* situation in which inflation has rocketed up, when in fact there are a ton of factors contributing to the crisis. Given that, we can't just assume that the current rates will continue forward indefinitely. If the inflation drops again, the disaster scenarios start to recede into the future.

Make sense?

And remember stock prices up to Y2K, and house prices up to last year? Going up 20% a year, every year, is not normal, particularly not for housing. Those are both forms of inflation, symptoms of the giant global pool of money sloshing about, chasing too little real wealth.

Since those figures were inconveniently high, the US government came up with a ridiculous gyration called 'owner's equivalent rent' to suppress house inflation from the numbers. But it was still inflation, and because it turned into a bubble, it became enormously destructive.

And so, is it continuing? No. Market mechanisms and regulation/oversight are starting to have their effects. Assumptions that depend on highly unusual situations persisting for years or decades are probably unrealistic. If they happen, there will be far more things going wrong than just the issue in question.

No, the giant pool of money is moving on to other things. That's part of why commodities have been going up so much.

What's left behind is enormous hardship; people who bought more house than they could afford, seduced by artificially low interest rates and artificially high returns.

Robear wrote:

Well, there's a big gap between 4.8% and 14%. That's what I'm pointing out (and I believe Malor acknowledged that). There's also the underlying assumption that this is a *normal* situation in which inflation has rocketed up, when in fact there are a ton of factors contributing to the crisis. Given that, we can't just assume that the current rates will continue forward indefinitely. If the inflation drops again, the disaster scenarios start to recede into the future.

Make sense?

It does, but I think we've crossed that gap from January to now (July). The top 25 or so countries (26 including China) have a significant portion of the world's population, and they are reporting numbers much more in the 12-14% bracket than the 4.8% bracket. If it doesn't drop, there's going to be a serious problem. And most economists that I've read are pretty sure that at this point the U.S. is cooking their books when it comes to inflation.

Anyone who thinks the US isn't cooking the books, and hasn't been more than a decade, simply hasn't looked into it. The numbers games they play are INSANE.

Malor,
How many guns and alcohol making equipment do you own? cause Gold is worthless, in the scenario you are describing. If I truely felt there was going to be a huge economic crash I'd buy 1) farmland 2) Guns/ammo 3) Stills/equipment to make alcohol. #1 and #3 are for value as commodities, and #2 is to make sure that #1 & #3 stay mine.

I'd worry more if the inflation causes were structural, rather than related to abuse of the system and subsequent failures. Now, Malor will claim they *are* structural, and we're at the beginning of the end; but that prediction has been false for a year now. It's bad, but it's not the end of the world.

There are things that would make me worry about that, but right now we're about in 1989/1990 or so. Not the Dust Bowl years.

My prediction has consistently been that things are a great deal worse than they appear on the surface, and that failures would cascade across multiple systems, and would get out of subprime. I believed I used the word 'contagion' well in advance of seeing in the mainstream media, but I'm too lazy to go look.

Regardless, you can't argue with the fact that that GAO has said we're bankrupt; we have to double tax receipts JUST TO BREAK EVEN. We have a gigantic trade deficit, one of the largest in percentage of GDP ever recorded... and that's in the world's biggest economy. We have an economy that's hooked on debt, one that needs houses to go up 10% a year just to function. And, on top of that, we have a government that's running a SIX HUNDRED BILLION DOLLAR deficit.

How much more goddamn 'structural' do you think things can GET? What other structure IS there?

More evidence:

IMAGE(http://research.stlouisfed.org/fred2/data/BORROW_Max_630_378.png)

That image is a mirror. The original source: St. Louis Fed.

(hint: that image should scare the hell out of you.)

The inflation numbers are out. So how well did you predict them?

The windfall of cash from Washington got eaten up in June by the worst inflation in 27 years, Commerce Department data showed Monday.

Nominal spending grew 0.6% on the month, but the increase was all due to higher prices, which spiked 0.8% — the most for a month since 1981.

Adjusted for inflation, June’s so-called real spending fell 0.2%, the first decline since February. Real consumer spending is up just 1.2% from a year ago.

The impact of the tax rebates on personal incomes was reduced in June: After getting $48.1 billion from the government in May, individuals received $27.9 billion.

Personal incomes rose 0.1% after a 1.8% surge in May.

More at MarketWatch

As ridiculously massaged as those numbers are -- they can literally change what they're measuring, month to month, to cherry-pick the best results -- that's a profound understatement to what's really going on.

Simultaneously, banks are in an enormous crisis, so we're in a race: can the Fed turn their bad debt instruments into dollars fast enough? If they can, we get a huge wave of inflation as a new round of debt issuance starts; if they can't, we get a depression as the bad debts collapse. But then those new debts will start going bad again, so we'll need another huge liquidity injection, and then another, and another. Eventually, we'll end up as Zimbabwe. We're trying to extract more value out of the economy than the economy can support.

One thing worth pointing out: when I say we need a commodity currency, I didn't start there. I used to roll my eyes at the goldbugs just like everyone else. Instead, I worked backwards from watching the Fed's antics for ten years. After watching them do such enormous damage to the US, even though they meant well, I don't think we have any other option. They're supposed to be the watchers, but nobody's watching them, and if they get it wrong, we're all f*cked, because we can't tell for a long, long time. A commodity currency is a check on power; it forces truth into the market.

We've been living on lies for a couple of decades now, and as we've done repeatedly in the past, we're trying to up the ante by issuing a bunch more lies into the marketplace to cover up the old ones.

Good markets run on truth and transparency.

I don't know, some of the anti-fed arguments are starting to seem borderline conspiracy theory-ish. I have a hard time believing the fed can, on one hand, have nothing but good intentions and on the other be so incompetent to completely destroy America. The law of probability would state someone halfway smart should of made it into the fed by now to smarten things up. If everything was so obvious, how do you have no faith they don't see it as well? We can't pretend (no matter how much we dislike administrations) that everyone at the top is an incompetent boob.

Maybe the sky isn't actually falling? Maybe the economy is really so large (estimates put $30 Trillion dollars per day moving in and through the US) that it is outside the logic of traditional economy interworkings? I've also heard this as a reason why the US going into a depression is impossible. There is simply too much money moving through our economy for their to be a depression. For the US to go into a depression the rest of the world's markets would already have to be broken and all the major economical players in poverty.

Inflations and recessions are normal. Major inflation and recessions are bad. We haven't seen the signs of Major anything like 14% inflation. If inflation really went up 14%, we would all know it, in our pocketbooks. Those of us on minimum wage and those of us making 200k a year - we would all be noticing a 14% inflation. And by notice I mean jumping and screaming about how broke we are. I mean, if we had inflation of that level I would expect to see riots in inner city grocery stores.

I don't know, some of the anti-fed arguments are starting to seem borderline conspiracy theory-ish. I have a hard time believing the fed can, on one hand, have nothing but good intentions and on the other be so incompetent to completely destroy America.

They didn't do it alone, but held the broken system together until the component pieces of the economy were utterly dependent on that system. Look at the numbers: an 800 billion dollar trade deficit, a 50 trillion dollar government deficit, enormous personal debt, and very little manufacturing, so we don't have much to ship overseas to pay our debts off. This is a f*cking disaster by any measure. Discretionary spending has to drop by OVER A THIRD just to get us back to break-even on the deficit, and then we have to start to repay the many trillions of dollars that are held in overseas banks; this is yet ANOTHER form of debt.

The Fed believed that making Wall Street prosper was the way to make America prosper; Greenspan believed in the power of derivatives to cure all ills and remove all risk. (seriously). And Greenspan was the ONLY power at the Fed for a long time; what Greenspan wanted, happened. They were tasked with price stability, and in the face of the profoundly labor-deflationary environment of globalization, they flooded the market with dollars to compensate.

Wall Street, knowing they had the backing of the Fed, started inventing all kinds of crazy new risk-transfer instruments (derivatives), which trade like money and look like money. All this liquidity floating around set off the stock market bubble. When it popped in 2000, and things started to go south, the Fed stepped up and backstopped the system, providing whatever amounts of cash were required to keep it solvent.

This set two MORE bubbles, debt and real estate. The Fed's biggest mistake was this: instead of trying to figure out why stocks were valued at 100, and then 40 just two years later, they focused all their efforts on getting stocks back to 100 again. They tried to prop up the artificially inflated prices from their first bubble, and that then set off two more bubbles, debt and real estate.

Now those things are trying to readjust, and once again the Fed is stepping in to try to maintain those artificially inflated prices, but now Congress is getting involved too. This will, in turn, set off some new bubbles elsewhere, because we fundamentally have too many dollars and dollar-like things chasing too little real wealth. We're abusing our fiat currency to try to prop up incorrect price levels, and we'll do even MORE damage to the economy in the process.

First we destroyed our manufacturing. Then we destroyed the balance sheet of the government. THEN we destroyed the balance sheet of the American consumer.

You might want to think about why, every time anyone calls a bottom, things just keep getting worse. Another bank just failed in Florida, the eighth in the last year or so.

You should look at that graph up there and be frightened.

Shoal07 wrote:

I don't know, some of the anti-fed arguments are starting to seem borderline conspiracy theory-ish. I have a hard time believing the fed can, on one hand, have nothing but good intentions and on the other be so incompetent to completely destroy America. The law of probability would state someone halfway smart should of made it into the fed by now to smarten things up. If everything was so obvious, how do you have no faith they don't see it as well? We can't pretend (no matter how much we dislike administrations) that everyone at the top is an incompetent boob.

Maybe the sky isn't actually falling? Maybe the economy is really so large (estimates put $30 Trillion dollars per day moving in and through the US) that it is outside the logic of traditional economy interworkings? I've also heard this as a reason why the US going into a depression is impossible. There is simply too much money moving through our economy for their to be a depression. For the US to go into a depression the rest of the world's markets would already have to be broken and all the major economical players in poverty.

Inflations and recessions are normal. Major inflation and recessions are bad. We haven't seen the signs of Major anything like 14% inflation. If inflation really went up 14%, we would all know it, in our pocketbooks. Those of us on minimum wage and those of us making 200k a year - we would all be noticing a 14% inflation. And by notice I mean jumping and screaming about how broke we are. I mean, if we had inflation of that level I would expect to see riots in inner city grocery stores.

We're already there on many items.

Another report.

Clearly the riots haven't started here yet, but they have elsewhere in the world. Note that the sharpest increases are in items that are highly perishable, i.e. are moved quickly through the market. You see inflation first in areas where inventory turns are measured in days, i.e. food and fuel, because they can't hide price increases or they would go out of business. The rest of the market just hasn't caught up yet.

Also note the last bit in the second report - one reason inflation doesn't appear to be as high is because the cost of Chinese products has been going down instead of up.

That's the reason we haven't been aware of the monetary disorder sooner; there's a profound deflationary undertow from the cheap labor in China. And the Chinese and Japanese central banks are sopping up enormous, enormous quantities of dollars.

The Fed has, in essence, been packing the mine full of gunpowder. (or, rather, standing by and cheering while everyone else did it, and dusting them off and putting them back to work if there was a mishap.)

It's all been underground, so we haven't really seen it, but now they're firing flares into the entrance.

That's a hell of a thread necro AND an hilariously appropriately themed bot to do it.

Jolly Bill wrote:

That's a hell of a thread necro AND an hilariously appropriately themed bot to do it.

Yeah. At first I scrolled up and didn't check dates and I was stoked that we were having this conversation again. And then I got sad when I saw the post by the bot. And then I laughed.

I reported that spam like last week. I'm kind of confused that it's still there. I guess the new report button doesn't work as well as the old "tag a thread as not-delicious spam" mechanism?

Hypatian wrote:

I reported that spam like last week. I'm kind of confused that it's still there. I guess the new report button doesn't work as well as the old "tag a thread as not-delicious spam" mechanism? :(

Apparently I was looking in the wrong "reported content" section. Whoops!

Certis wrote:
Hypatian wrote:

I reported that spam like last week. I'm kind of confused that it's still there. I guess the new report button doesn't work as well as the old "tag a thread as not-delicious spam" mechanism? :(

Apparently I was looking in the wrong "reported content" section. Whoops!

But now I don't know where to go to buy a house in Miami.

Demosthenes wrote:
Certis wrote:
Hypatian wrote:

I reported that spam like last week. I'm kind of confused that it's still there. I guess the new report button doesn't work as well as the old "tag a thread as not-delicious spam" mechanism? :(

Apparently I was looking in the wrong "reported content" section. Whoops!

But now I don't know where to go to buy a house in Miami.

I'm going to suggest going to Miami.

bnpederson wrote:
Demosthenes wrote:
Certis wrote:
Hypatian wrote:

I reported that spam like last week. I'm kind of confused that it's still there. I guess the new report button doesn't work as well as the old "tag a thread as not-delicious spam" mechanism? :(

Apparently I was looking in the wrong "reported content" section. Whoops!

But now I don't know where to go to buy a house in Miami.

I'm going to suggest going to Miami.

Based on my experience with Ft. Lauderdale, I'm going to suggest the opposite.

SpacePPoliceman wrote:
bnpederson wrote:
Demosthenes wrote:

But now I don't know where to go to buy a house in Miami.

I'm going to suggest going to Miami.

Based on my experience with Ft. Lauderdale, I'm going to suggest the opposite.

What's the opposite of Miami?

LouZiffer wrote:

What's the opposite of Miami?

Yourami?