patrick.net

I know, it's global.

Maybe I can join a religion that says that paying taxes is blasphemey or whatever. Then I can not pay and say "it is against my religion; don't diss me". Let's start our own.

Can someone please explain to those less educated about the American monetary system what the implications of the Fed not publishing “M3″ anymore means?

en.wikipedia.org/wiki/Money_supply

Different measures of money have different technical definitions. The most common measures are named M0, M1, M2, and M3 (from narrow to broadly defined). In the United States they are as follows, as defined by the Federal Reserve:

M0: The total of all coins 'minted' and paper 'printed' cash in circulation. (i.e. currency)
M1: M0 + the amount in demand accounts (also called "checking account" or "current account")
M2: M1 + other various savings account types, money market accounts, and certificate of deposit accounts (CDs) of under $100,000.
M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements. As of March 23, 2006 information regarding the M3 will no longer be published by the Board of Governors of the Federal Reserve System, in contrast to the other three reports of the United States money supply, provided in detail .

any body know whats going on in santa clara county, california....heart of silli valley.....home inventory is reducing here instead of increasing......with 4 kids, dammit i need a house, but not at these prices....how much longer people......?

Scott J,

As I understand it, M3 is the broadest measure of the U.S. money supply, and encompasses assets in the form of MBSs, government & corporate bonds, and other types of so-called "repurchase agreements". The fact that the Fed has announced it will discontinue reporting it, is taken as a sign by many that a big change is coming in M3 --one that the Fed doesn't want anyone to know about.

with 4 kids, dammit i need a house, but not at these prices….how much longer people……?

Can you or someone else explain to me why you need to buy a house rather than rent a house?

http://money.cnn.com/2005/11/15/pf/holiday_luxury_toys/index.htm

man....this is just wrong!

man….this is just wrong!

From the link:

"...Maybe that's why their Children's ATM Bank is such a hit, an electronic teller machine that accepts real coin- and currency-deposits and doles out withdrawals provided Richie Rich can remember his PIN"

Damn.
Seriously, most of this crap is no good for kids; they learn too early to be a passive consumer, vs. inventing their own fun.

Sales always decline toward the end of the year, so this is an indication of nothing other than the seasonal nature of the market

Inventory has risen significantly in my neck of the woods....and sellers are slashing their prices only to get low-balled furthur. This doesn't seems to be seasonal nature of the market.

Very few people buy homes in late November and December. Why? It’s the holidays, and people are saving for vacations, travelling and presents.

...but in the bubble areas it's the high price and the interest rates going up.

It won’t be until next March or April until sales pick up

well, in the bubble areas you can substitute inventory for sales.

it won’t be until those taxes are paid and returns are received before most people start investing in real estate again.

Over here it won't be until the sellers accept significantly lower prices for their shitty property.

Only the most foolish of investors are unaware of and unprepared for this.

Actually that herd has already took the plunge.

Sales always decline toward the end of the year, so this is an indication of nothing other than the seasonal nature of the market.

Agree that sales usually decline, but (correct me if I'm wrong here) isn't it also true that for-sale inventory also typically decreases towards the holidays? Right now, inventories are up --way up-- just about everywhere.

I know some inventory has been pulled either due to the holidays and/or wanting to try again in the spring months.

...and don't be fooled by what you see as far as for-sale signs...some of them don't have a for-sale sign, like my Mother's neighbor. I'm not sure why, maybe because the RE agent doesn't want people to know the true inventory, maybe the owner doesn't want the sign in his/her lawn....or maybe they just plain ran out of them (very likely).

Seriously, most of this crap is no good for kids; they learn too early to be a passive consumer, vs. inventing their own fun.

Now you know why this generation is so irresponsible when it comes to money...this is why the bubble has grown to mammoth proportions. Every year kids get more and more expensive stuff that just teaches them the wrong things. The next generation is going to be a really screwed up breed, that's all I have to say!

Sales always decline toward the end of the year, so this is an indication of nothing other than the seasonal nature of the market

In my neck of the woods, sales are off and prices are down much further than you would normally expect for this time of year; and realtors acknowledge that too.

But I am waiting until the Spring to see what happens just to be sure. If sales are still bad in the Spring compared to what they "normally" are, then I am calling it as officially over.

“(There are) some tremendous gains and it causes first-time buyers to sit back and say ‘whoa, can we get in?’ and my typical response is that you can’t afford not to get in,” he said. “If you don’t get in now, two, three, four or five years from now you’re not going to be able to get in.”

Here is an example of who should pay. This guy should be guaranteeing the buyers that he will pay the difference if the price falls and they have to sell before making a statment like that!

Any of you ever been to a LI wedding or barmitzva? It’s sometimes not about the child getting married or becoming an adult in the community it’s about the Parent’s showing off.

I was married here and I paid for my own wedding approx $20k which was considered cheap...... I do know what you mean, in fact they even throw expensive sweet 16/graduation parties at the same places where they do weddings. When I got married, I had a hard time booking a place because of this...those damn little brats are already giving me problems, I could imagine when they grow up! :)

every year kids get more and more expensive stuff that just teaches them the wrong things. The next generation is going to be a really screwed up breed, that’s all I have to say!

Someday, children reared on objects to validate their existence will be "adults" depending on things to cover a gaping hole they never learned to fill. The irony of ownership is how objects of wealth can so easily become the provider of a person's existence and identity. The same can be said of homes when people leverage themselves to the gills just to be a homeowner But, who owns whom?

This is another reason I don't want to drop anchor just yet.... Frankly, I don't know what social class I'm in, I guess I'll know when the smoke clears. I guess we'll know at that time who is rich and who is poor. I know I don't want to be a poor peeon living in a rich mans area. I want to live with the same social class as myself, even if it means moving to another state or country... I want my kids to grow up in a snobless world.

Frankly, I don’t know what social class I’m in, I guess I’ll know when the smoke clears.

And, who should care what "social class" one belongs to? Like you said, it's far better to be around people who don't try to live the upside of their neighbors.

I hear a lot about how the "middle class" is getting pushed into poverty, but personally I think we've done a bit of it to ourselves. Everyone bought the SUVs, then came the overpriced McMansions, and runaway spending on nearly everything. Look at the savings rate. People convinced themselves they've needed all this stuff, and now they'll have to pay.

Reminds me so much of "The Great Depression"
http://money.cnn.com/2005/11/21/news/fortune500/gm_cuts/index.htm

And, who should care what “social class” one belongs to? Like you said, it’s far better to be around people who don’t try to live the upside of their neighbors.

Well...I want to know whether I'm going to be poor....or whether I know I'm going to live a halfway decent life. I know I'm not going to be among the rich....nor do I care to be.

I hear a lot about how the “middle class” is getting pushed into poverty, but personally I think we’ve done a bit of it to ourselves. Everyone bought the SUVs, then came the overpriced McMansions, and runaway spending on nearly everything. Look at the savings rate. People convinced themselves they’ve needed all this stuff, and now they’ll have to pay.

Many people have lost their jobs to outsourcing........they did not ask for this, you should know....company CEO's just got greedier and would screw over the middle class just to make more for themselves...so they could buy their snobby kids $250k toys.

I consider myself middle class, but middle class will soon be extinct.... I never bought an SUV, I never bought a McMansion or even any house for that matter..... I know I have more savings then most people. I have never lived beyond my means and I want my children to learn to be the same.... I didn't need any of this stuff....why do I have to pay?

company CEO’s just got greedier and would screw over the middle class just to make more for themselves…so they could buy their snobby kids $250k toys.

Well, just to clarify...I'm not accusing you of living beyond your means.
In general, if people saved more they'd be less vulnerable to economic downturns.

Another irony I see: the US economy's dependence on domestic retail consumption. Want to bring greedy corporations to their knees? Just don't buy their crap, most of which is non-essential anyway. If most of the population has lost their disposable income, these companies are sunk.

August 12, 1931
“Henry Ford has shut down his Detroit automobile factories almost completely. At least 75,000 men have been thrown out of work.”
– The Nation.

HARM and others,

Thanks for the responses to M3. I just read the wikipedia article, although its a bit tricky for an untrained person someone like myself.

As far as the Fed doing something with the monetary supply that they don't want us to know about, it sounds like the government knows that inflation will occur, but they don't want people to realize it until they find that a gallon of milk costs $5 at the local supermarket.

I guess they might also want to hide stagflation (no growth in GDP with lots of inflation?). Are they afraid that people will say "man you guys $uck, I'm not going to re-elect you."? Aren't people like AG or Ben Bernanke in their posts until they die/retire?

Also, if the housing market crashes and takes the rest of the US economy with it, how can inflation occur?

I should have taken my economics classes seriously in college. The more I lurk on these blogs, the more I realize I don't know JACK! The last line in the wikipedia article gives me some sort of strange relief about my lack of understanding.

"Money supply remains one of the most controversial aspects of economics itself." If its controversial, it can't be simple...

re. seasonal slowdown or not, I saw Leslie Appleton-Young, the chief economist for the Cal. Assoc. of Realtors, speak recently, and she herself said that what is going on in CA right now is much more than just a seasonal slowdown. Typically inventory is low at this time of year (along with slow sales), but this fall inventory is WAY up!

It's nice to know that there are still some honest people in the RE industry.

Also, if the housing market crashes and takes the rest of the US economy with it, how can inflation occur?

.....that's why I believe we first have inflation...which is happening right now...and as it climbs, the FED will continue increasing rates(maybe even faster) at the same time, people will be cutting back on spending which along with the RE crash, we will have a very bad resession followed with falling prices.....just my prediction.

"Hm. That seems to be awfully close to the 10 yr T-Bill. Are these guys buying mortgage debt from your money? Or how else can they pay 4.5% and still make money?"

I've heard talk of the yield curve inverting. Historically, this has not been a good sign for the economy.

You can see here that it is pretty much flat
http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve#flat

I am actually surprised that some posters express shock or relief that an economist for the California Association of Realtors, or any realtor for that matter, would present an unbiased report on the market.

So then why don't you answer my simple questions? I'll repeat:

Scott, if your market was seriously overpriced (I’m not so sure it isn’t), what would you do? Would you still convince buyers to buy anyway? …would you warn them that maybe they shouldn’t buy? …would you sell anything if you did? ….would you change careers?

OMG, Tannenbaum!

Now its my turn to ROTFLMAO! As a person in the Information Technology industry in the bay area, I remember the dot bomb days when the "barriers of entry" were frighteningly low. Do you breath? Can you spell COBOL? If so, you're hired as a Y2K developer. Resume? What's that? 21 year old college grads got $60k jobs for doing nothing! I got a lot of flack for the lack-talents in the IT industry back then, as if it was my fault companies hired these guys. Now ScottC is getting it in real estate. I guess there are more parallels in these two bubbles than I originally thought.

In ScottC's defense, there are probably a lot of good realtors out there who will still be employed once the dust settles, all the other chaff will have to go find something else to peddle. Since I've learned a lot reading info on this blog, I hope you, ScottC are still gainfully employed in Real Estate. I'm still alive in IT.

RE agents are just salesmen...and we all know that salesmen will push their product even if they believe it is a waste of money....why? because that is how they make a living. Look at tele-marketers, do you think they like to be called up while they're eating dinner to have to listen to a 10 minute commercial about some special offer? No...of course not....but they still do it to everyone else don't they? It's their job and it puts food on their table.

I do blame the realtor, but at the same time I blame the idiot buyer (sucker) who really shouldn't trust a total stanger who obviously is trying to make a sale because it is in their best interest. In the case of the tele-marketer, I just hang up........but if someone is going to listen to them and take the bait, then they are the fool....just think, if everyone hung up on every tele-marketer call, they wouldn't sell anything and the tele-marketer would go extinct......wouldn't that be nice? No more tele-marketers.......but that ain't never gonna happen, because there are too many suckers in this world....So use a realtor if you don't feel comfortable without one, but only use them to make the transaction, don't trust them as if they're your friend, because they are not....if they know they can get you to spend more on the property, then they will make sure you do. Most agents work on commission so it is in their best interest to sell at a higher price.

But ScottC cannot even fathom that unethical people in his profession exist???

Well, I think it's good to remember ethical examples of realtors, for those who plan to buy another home someday. ScottC definitely strikes me as one of the better ones.

I know several realtors who are close family friends, totally trustworthy people. These people were warning their friends to sell last year, way before many people saw it coming. Otoh, these same friends told us about some realtors who bragged about driving up local housing prices (through appraisals perhaps?). Anytime there's so much money to be made, it's going to mess with people's heads (buyers too). In general, the SF Bay attracts self-absorbed people with the get-rich mentality.

Read any David Lereah lately?

David Lereah is my personal hero. He will become as famous as Irving Fisher.

i wonder if that is the advise the RE agents gave to their customers..

Do ya think they'd be called customers otherwise?

Low bond rates do not cause deflation. Quite the opposite... Deflation causes low interest rates.

The major mistake made by the Fed in the early years of the Great Depression was tight monetary policy employed to squeeze the excesses out of the economy. After a few years they loosened up, but by then the deflationary spiral was strong. Bond rates reflected that reality. The Fed was way behind the curve on that one, not leading it.

Unemployment during the Great Depression was estimated to be between 15% and 25%.

Low bond rates do not cause deflation. Quite the opposite… Deflation causes low interest rates.

The major mistake made by the Fed in the early years of the Great Depression was tight monetary policy employed to squeeze the excesses out of the economy. After a few years they loosened up, but by then the deflationary spiral was strong. Bond rates reflected that reality. The Fed was way behind the curve on that one, not leading it.

Indeed --thanks for the historical perspective, Zephyr.
Personally, I think the Fed is so afraid of a 1930's style deflation scenario, (and how horribly it would magnify the national Debt and those $Trillions in SS & Medicare obligations) that it will try to do anything and everything in its power to inflate our way out of it.

They don't call him "Helicopter Ben" for nothing ;-) .

Ben Bernanke will very likely tighten or liquify, as needed, to keep inflation within the range of 1% to 2%. If this proves true the 10 year treasury should trade at no more than a 4% yield, and 30 year mortgage rates will be a little over 5%.

The damage potential of a little deflation dwarfs the damage potential of inflation. So it deserves greater weight in the policy trade off considerations. He is famous for saying that if things were bad enough he could prevent deflation by dumping cash from helicopters if need be.

"Deflation causes low interest rates."

Yes, sort of. Lowering the interest rate (i.e. increasing liquidity), is the Fed's response to the threat of deflation. Deflation is usually the Free market's response to prolonged and/or excessive inflation. Therefore, low interest rates come along with or precede deflation because the Fed is trying to deter deflation by lowering the interest rates.

"The damage potential of a little deflation dwarfs the damage potential of inflation"

Inflation is the only damage here. Deflation is the cure.

pbass Says:
You have to back up to see the big picture without all those tiny annual blips. See Shiller’s graph of RE prices 1881 to 2000. http://tinyurl.com/9hxuz

Hm. Shiller's graph shows a "permanently high plateau" starting around 1946, and the rising edge of the curve at that time does not look unlike the one of the last 5 years, both in form and relative increase.

I'm confused now. Somebody please explain.

I’m confused now. Somebody please explain.

_smile_ I've been saying that for three years now...

Cheers,
prat

Frank, Inflation does not cause deflation... They are opposites.

Perhaps this link will be helpful.

http://www.oswego.edu/~economic/newbooks.htm