patrick.net

The state didn't cause inflation. It was a storm of young people starting households all at the same time, an oil price shock (political; punishment for supporting Israel), and a dearth of housing which caused inflation.

Plenty of states did not abandon Keynes - and entered the 80s vibrant. They are still vibrant today, despite having much higher taxes, safe retirement, and strong unions.

Wealth equality destroys societies:

thunderlips11 says

The state didn't cause inflation. It was a storm of young people starting households all at the same time, an oil price shock (political; punishment for supporting Israel), and a dearth of housing which caused inflation.

That is where your ignorance shows. Inflation is caused by excess money supply period.

One of the primary causes is war. In that time period it was LBJ and Vietnam

indigenous says

That is where your ignorance shows. Inflation is caused by excess money supply period.

So, where is the inflation now? QE created a shitpile of money, a hulluva lot more than in the 70s.

When the theory doesn't explain reality, dump the theory.

thunderlips11 says

where is the inflation now?

What? Where have you been? Damn, this goes to show you it is absolutely a waste of time to teach idiots.

Nobody says

What? Where have you been? Damn, this goes to show you it is absolutely a waste of time to teach idiots.

Wow, you sure ponied up the evidence that there is widespread inflation across the board. Consider me enlightened.

Inflation in rents/home prices, education, medical insurance has been significant. Some of these things can be moderated to some extent by not having kids or having fewer kids. Entertainment, movies, cable/satellite service - all significantly up in last 10 years, same as gasoline. Food - not as much of an increase relatively speaking as the other items that I listed, but still higher.

I define inflation as increase in prices and deflation as decrease in prices. Change in money supply may result in inflation or deflation but in in of itself is not a sufficient pre-requiste to cause either.

Problem is we have certain interests who try to fear monger people into believing that drop in prices (deflation) will result in some plague calamity that will cause layoffs. We all know who these interests are - they are the debtor gliterrati and are afraid of falling asset prices like a condemned man is afraid of a needle.

Wealth inequality by itself does not destroy societies. Horrible purchase power parity if representative of significant part of the population destroys societies whether there's inequality or not. For instance, many soviet workers were bunched between earning 100-120 rubles per month. Their lives sucked. They were equally poor.

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing, of stocks (creating volatility) beyond their Fundamentals, and buy up assets. These items do go up enormously in value relative to the incomes of the 99%, and it creates even more income streams going upward and less circulating among the majority of the population.

As was said on other threads, it wasn't unusual for a guy in a town to own a couple of duplexes, maybe even an older home or two rented out. What is unusual is Wall Street getting involved with buying up SFHs for rental income. And not just luxury apartments but ordinary Suburban SFHs. This is a symptom of the problem.

"But by your reasoning North Korea should be the paradigm..."

Norway and Denmark, actually.

http://www.cnn.com/2014/03/20/travel/happiest-countries-to-visit/

I was actually doing some deeper self-study this weekend on the actual difference between "socialism" and "communism" since I realized I didn't have much of an understanding of what Marx wrote and what the communists themselves were thinking; it's a subtle answer, actually.

Communism as preached is the utopian cloud-cuckoo system as achievable as libertarian anarchism (and quite indistinguishable one from the other since they are both equally bullshit)

Communism as practiced for most of the 20th century by the Soviets, their European satellites, the PRC, Cuba, and Vietnam was supposed to be, technically, a transitory socialist economic regime where society increased its capital sufficient to transform itself into the Communist end state they were ostensibly working towards.

Of course this was bullshit since the actual Communist Parties were basically thugocracies and required everyone's total acceptance of the dogmatic, totalitarian party line as handed down by the strongman running the place.

AFAICT Gorbachev was the first reformer of the Soviet system to actually move away from "the Communist Party is Always Right" dogma, and after he unleashed people thusly, the soviet system there wasn't going to last long.

China is a more curious example, as their party thugocracy is still holding onto power there even though they've backed off a lot on the whole big-C Communist program thing.

Also, I was reading on how Stalin ran the USSR 1927 ~ 1953. I'd known about the Ukrainian holodomor, the party and Red Army purges of the late 1930s, but didn't realize how thorough he was in basically liquidating anyone who was a potential threat to his personal control of the Communist Party.

This went well beyond what the Nazis did to terrorize Germany, Stalin and his henchmen actively went after their Communist Party brethren directly, since Stalin rose from relative obscurity in the 1920s and the people like Trotsky knew he wasn't any mainspring of the revolution, just a man willing to out-thug anyone else.

Basically anyone who crossed -- i.e. disagreed with -- Stalin in the 1920s got whacked in the 1930s. The place was so nutty the NKVD actually ran secret prison camps that skilled political prisoners worked out of -- e.g. Tupolev and Theremin

http://en.wikipedia.org/wiki/Sharashka

thunderlips11 says

So, where is the inflation now? QE created a shitpile of money, a hulluva lot more than in the 70s.

It is in the Stock Market and RE

thunderlips11 says

When the theory doesn't explain reality, dump the theory.

The theory is the touch stone of economics.

Nobody says

What? Where have you been? Damn, this goes to show you it is absolutely a waste of time to teach idiots.

Hmm I was thinking the same...

thunderlips11 says

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing, of stocks (creating volatility) beyond their Fundamentals, and buy up assets.

Temporarily, to think otherwise is folly

indigenous says

Temporarily, to think otherwise is folly

Well, how about 40-50 years? I would say that's not temporary.

Bellingham Bill says

"But by your reasoning North Korea should be the paradigm..."

Norway and Denmark, actually.

Norway and Denmark are actually high on the freedom index, so are doing more right than wrong.

Socialism is a charade. There are 3 things you can do with resources you can spend it, save it, or invest it. With socialism one way or another it is the first one, IOW they are eating the seed corn.

If you want to understand Karl Marx look at dialectic materialism. It is shit but it is the vehicle Stalin used to rule with an iron fist. And yes he was insane and should have been shot by reasonable men.

tr6 says

Well, how about 40-50 years? I would say that's not temporary.

Yup since Nixon took us off Bretton Wood. Temporary in the scheme of things, it will end with the collapse of the country, IMO about 15yr.

thunderlips11 says

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing,

If the wealthy person is living in the same housing as the average guy, then he is not really consuming more housing supply than the average guy; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply. The same housing units that may well have been abandoned because the renters/ex-owners could not afford to or did not have the good habit to maintain the houses.

of stocks (creating volatility) beyond their Fundamentals, and buy up assets.

Then we are talking about the wealthy being foolish and paying for a bubble. The market place would normally soon administer medicine via bubble burst. . . except you are also for the government bailout of the wealthy gamblers on taxpayer dime via the FED! You are the idiot who support the ideology of privileged gamblers (too big to fail).

These items do go up enormously in value relative to the incomes of the 99%, and it creates even more income streams going upward and less circulating among the majority of the population.

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

As was said on other threads, it wasn't unusual for a guy in a town to own a couple of duplexes, maybe even an older home or two rented out. What is unusual is Wall Street getting involved with buying up SFHs for rental income. And not just luxury apartments but ordinary Suburban SFHs. This is a symptom of the problem.

There is a price for everything. When the market hit the 2009-2011 bottom, you were too chicken little scared shitless to buy, so someone else stepped into the breach. The trade was over by late 2013, so there is little point decrying it a year later.

Reality says

; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply.

The fallacy is that Joe Potential Homeowner is bidding against another Homeowner. He's not. He's competing with either cash-flush wealthy local investors, or more frequently, professional, well capitalized Wall Street Firms handling huge amounts of money and buying properties in bulk to rent. In some areas, he's competing with Russian and South American Oligarchs (Miami) or Chinese Businessmen (West Coast Cities) as well who are looking to park their illicit gains.

Joe's Household makes $60k/year, not capitalized to $600M with leverage.

Reality says

The same housing units that may well have been abandoned because the renters/ex-owners could not afford to or did not have the good habit to maintain the houses.

Or, the prices would drop to normal levels of affordability for the John Doe family.

Reality says

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

When homes are too expensive for Joe Schmoe to buy, he has to rent. Since many Joe Schmoes are priced out or wisely refuse to gamble on a mortgage payment when they don't know if they'll be laid off tomorrow, or simply can't afford the price, they are all trying to rent at the same time, so rents go up along with the home prices - for a while, anyway.

This explains why mortgage rates are so damn low, but homeloaners aren't buying.

Reality says

. When the market hit the 2009-2011 bottom, you were too chicken little scared shitless to buy, so someone else stepped into the breach. The trade was over by late 2013, so there is little point decrying it a year later.

I brought a home in 2009 and I rent it out. :)

My only regret is the market I brought it in. If I had brought in Miami, I would have doubled my money.

indigenous says

Temporarily, to think otherwise is folly

Temporary is right, but guess who will feel the pain?

Remember who felt the pain the last time?

thunderlips11 says

indigenous says

Temporarily, to think otherwise is folly

Temporary is right, but guess who will feel the pain?

Remember who felt the pain the last time?

Yup but this time there will not be any subprimes. This time there will not be any TBTF MBSs. But the investors who are leveraged will get hurt. If not leveraged then their balance sheet will change a bunch.

thunderlips11 says

Reality says

; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply.

The fallacy is that Joe Potential Homeowner is bidding against another Homeowner. He's not. He's competing with either cash-flush wealthy local investors, or more frequently, professional, well capitalized Wall Street Firms handling huge amounts of money and buying properties in bulk to rent.

Joe Potential Homeowner does not have to own a house to be living in a house. If the bank mortgage rate is 4%, property tax is 1.5%, insurance+maintenance is 0.5-1% . . . while the landlord is charging only 3-5% rental yield, most readers of Patnet should know that it is better to rent than buying. I did rent when given those parameters. I was quite grateful to my then landlord despite having paid him $180k+ over 6.5 years renting from him; the cost of ownership would have been higher still. I documented that quite extensively back in 2010-2011, just before I flipped around on the rent-vs.-buy position. It was a good summary on how to "short" housing during a bubble in one's life, via renting.

In some areas, he's competing with Russian and South American Oligarchs (Miami) or Chinese Businessmen (West Coast Cities) as well who are looking to park their illicit gains.

Joe's Household makes $60k/year, not capitalized to $600M with leverage.

If Joe makes $60k/year, he has no business trying to compete in the most sought-after zip codes in terms of ownership. Those zip codes have huge stocks of rental houses that compete to such a degree that the rental yields are typically in the 3% range. The foreign buyers of real restate are usually the bag holders in an economic cycle. The dollars they earned from exporting whatever stuff to the US have to be repatrioted and liquidated somehow; wasting it on a RE bubble on prize properties that have little bearing for most middle class Americans is better than them trying to buy up all sorts of commodities and drive up PPI and CPI.

thunderlips11 says

Reality says

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

When homes are too expensive for Joe Schmoe to buy, he has to rent. Since many Joe Schmoes are priced out or wisely refuse to gamble on a mortgage payment when they don't know if they'll be laid off tomorrow, or simply can't afford the price, they are all trying to rent at the same time, so rents go up along with the home prices - for a while, anyway.

This explains why mortgage rates are so damn low, but homeloaners aren't buying.

If Joe Schmoe can not be certain about his future income, he is of course better off renting instead of buying on mortgage borrowing. Why would you want him to buy, and then get foreclosed and also getting the housing stock ruined. Your position seems to be rather emotional, instead of rational.

thunderlips11 says

I brought a home in 2009 and I rent it out. :)

Then aren't you just a little hypocritical?? ;-)

My only regret is the market I brought it in. If I had brought in Miami, I would have doubled my money.

I see. Well, at least you didn't buy pets.com stock.

Reality says

I see. Well, at least you didn't buy pets.com stock.

I brought the Iraqi Dinar to back freedom (and fund my retirement) --- and I lost it all!

https://www.safedinar.com/

thunderlips11 says

Best point of the lecture: Helping the bottom 1% is a lot less effective than curtailing the top 1%.

Yes. But nearly every time the government, which is universally owned by the 1%+ group, steps in to make things more equal the middle class is destroyed, the 1% do even better and the poor are still poor.

Thomas Jefferson wanted every citizen to own an acre of land and be under a use it or lose it type arrangement but with oligarchs and a rentier class we see here today where people strive only to make unearned income this will only get more and more ridiculous.

VOTE YES ON PROP G! If only to send a signal to the out-of-touch landed elite in SF. If it's bad long-term policy (which I doubt it could be), it can be reversed later.

Speaking of competing with All Cash buyers:

http://patrick.net/?p=1250852

It's one third of all homes sold nationally, and down from last year:
http://www.centralvalleybusinesstimes.com/stories/001/?ID=26934

50% in Florida.

Reality says

Why would you want him to buy, and then get foreclosed and also getting the housing stock ruined. Your position seems to be rather emotional, instead of rational.

See above. I explained how increasingly, landlords are faceless investment trusts, rather than local well-to-do. Money goes out, does not necessarily come back, except in the form of more bids on more housing stock.

Furthermore, instead of Joe Sixpack having an asset where his actual job is, he's got to schlep miles away. Since 3% yields suck anyway, it's better to have a resident owner that cares instead of increasingly absentee landlords that are number crunchers that don't give a shit.

Bad for the economy, the environment, and certainly the trade deficit.

When you fill up your car, you fill up ISIS' coffers.

I really love how this speaker discusses the inefficiencies of hoarding housing. Rich and thoughtful debate.

The old lady who speaks around 1:01:20 is quite odious. Just sayin'.

lahossain says

I really love how this speaker discusses the inefficiencies of hoarding housing. Rich and thoughtful debate.

The old lady who speaks around 1:01:20 is quite odious. Just sayin'.

I don't see the link?

thunderlips11 says

I explained how increasingly, landlords are faceless investment trusts, rather
than local well-to-do. Money goes out, does not necessarily come back, except in
the form of more bids on more housing stock.

That's the unfortunate side effect of QE and zirp. They find that rental returns are attractive especially in areas with "proximity to jobs."

thunderlips11 says

I don't see the link?

Just your link. I just keep waxing poetic about this great talk. I get excited hearing people talk about this issue--which means recognizing it in the first place.

CaptainShuddup says

You guys make it sound like wealth inequality is first a bad thing, and second something that just came along when Bush got elected.

Do you really lack the ability for nuance and detail so much?

lahossain says

Just your link. I just keep waxing poetic about this great talk. I get excited hearing people talk about this issue--which means recognizing it in the first place.

OH. I listened to it several days ago, but I know EXACTLY the questioner you're referring to. The old Posh cunt.

Wouldn't it be funny if ordinary Schmcuks got the Bankster treatment from Politicians?

"Billy Bob is here, sir."
"Show him in, show him in. Billy Bob, sir, how great to see you. I did enjoy attending the latest Nitro Burnin' Funny Car rally with you last week."
"Hey, so did I, hoss. But hoss, listen. I put all my money down on Iraqi Dinars in the name of Freedom, even HELOC'd the house. Now I can't afford any Monster Truck Rallies"
"Well, Billy Bob, you need a bailout, sir. I will lend you thousands of dollars at no interest, guarantee your mortgage, give you a subsidy and a tax write off for supporting the important Race Car and Demolition Derby Industry, and we'll pass a bill giving you funeral money for Old Yeller."
"But don't give my ex-wife, who just lost her job at Manny's Diner, any money."
"No, no Billy Bob. That would be socialism."

thunderlips11 says

Reality says

I see. Well, at least you didn't buy pets.com stock.

I brought the Iraqi Dinar to back freedom (and fund my retirement) --- and I lost it all!

https://www.safedinar.com/

Hope you learnt your lesson. Anything that says "In Allah we trust" will eventually be worth zero.

zzyzzx says

Wealth equality destroys societies:

Now I know why they say "A picture is worth a thousand words."

thunderlips11 says

Wouldn't it be funny if ordinary Schmcuks got the Bankster treatment from Politicians?

That's why communism/socialism/central-planning (central banking is one of the 10 planks proposed in the Communist Manifesto by Karl Marx) is just slavery dressed up in fancy words: owner privileges at the expense of the vast slaves.

thunderlips11 says

See above. I explained how increasingly, landlords are faceless investment trusts, rather than local well-to-do.

That's the result of central planning of money. How is this significantly different from mortgage payment to far away big banks?

Money goes out, does not necessarily come back, except in the form of more bids on more housing stock.

That is not correct. What the central banking cabal and their cronies want is not money per se (which they can print) but the fruits of labor from the economic periphery.

Furthermore, instead of Joe Sixpack having an asset where his actual job is, he's got to schlep miles away.

Renting actually provides better mobility than owning.

Since 3% yields suck anyway, it's better to have a resident owner that cares instead of increasingly absentee landlords that are number crunchers that don't give a shit.

Are you talking about local landlords vs. big banks? In that case I agree with you. Many home debtors however have proved themselves incapable of taking care of the houses. It seems to me that only about 60% of the population are capable of taking good care of their houses. The other 40% need to be housed somehow.

Bad for the economy, the environment, and certainly the trade deficit.

When you fill up your car, you fill up ISIS' coffers.

ISIS is just another leg of the Petro-Dollar Complex. The US is rapidly becoming the largest oil producer in the world.