patrick.net

San Francisco RENTER Says:
PS: “Siddartha” by Hesse is one of the best books ever written!

Very true.
Warmly recommended especially if one's thoughts tend to revolve around things that ultimately don't matter (like real estate :-) ). I must go and read it again.

jeffolie,

I am agreeing with your reasoning, just not the deflation conclusion. Sorry if I was unclear. The other side of the QTM equations you invoke require a determination of what happens to savings and investment (and taxes, but we'll reduce that to G since the gov't in the US doesn't save). The US is not Japan. I cannot imagine a circumstance in which reducing the nominal rate in the US to anything near zero would not spur credit driven investment and consumption. Further differences, the US abides by the Large-Open Economy model, whereby the US has the power to set nominal rates outside of real rates (we can sustain differential nominal rates from the row). The US does not interfere with its currency, Japan does, thus reducing Japan's monetary effectivity. Finally, the US maintains an extra "trade credit" in terms its military sphere of influence--it's "umbrella" if you will. That is, the US could always reverse capital flows by retracting its military protection from Europe and Japan, thus forcing their G as a % of GDP to dramatically rise and ours to dramatically fall. (Keeping in mind the US already has a much lower G%GDP than either Japan or the EU).

Randy H

Deflation will happen and I reject your objections:

The US reduced its overnight fed funds rate to near zero in the 1930 while we were in Depression without spurring credit driven investment and consumption until WW II. So, for more than 10 years it happened here.

The US does interfere with its currency often. The US makes agreement and persuades other central banks to revalue relative to the dollar. Very recently, China revalued its currency at our request. Nixon once arbitrarily revalued the dollar by 10 percent and took us off the gold standard.

The US has not and will not remove the forces kept around the world. These bases constitute forward positions to project our superpower might, image and trade.

Surfer-X says:
I just rented a house in $anta Barbara, pretty damn pimp, $1900 a month, and get this, the house just sold for 1.67 million. Do the math.

Heh. Your rent barely covers the owner's property tax liability. Negative cash flow of around $100k per year, plus $100k transaction cost to sell the house. Nice.

Speaking of property tax... Over the last few years, I've witnessed quite a few people be very surprised when their first property tax bill arrived, as if either nobody had told them about it, or they had deliberately ignored that figure in their mental model. Odd.

The US reduced its overnight fed funds rate to near zero in the 1930 while we were in Depression without spurring credit driven investment and consumption until WW II. So, for more than 10 years it happened here.

This contradicts the data. Reference Mankiw et. al.

The US does interfere with its currency often. The US makes agreement and persuades other central banks to revalue relative to the dollar. Very recently, China revalued its currency at our request. Nixon once arbitrarily revalued the dollar by 10 percent and took us off the gold standard.

Neither of the examples you state are monetary intervention, but political intervention. While political urging may indeed affect exchange rates, it is not monetary intervention. Please provide an example of direct monetary intervention by the US in the USD FX post Carter.

The US has not and will not remove the forces kept around the world. These bases constitute forward positions to project our superpower might, image and trade.

You invoked the 30s as an example of historical recurrance. What do you think occurred between 1924 and 1941? If the depression can happen again, so can isolationism and mercantilism.

Randy H

We will have to agree that we disagree politely. I admire your thoughtful comments.

I have a hard time separating politics from monetary actions. I find them mixed together, overlapping, and neither acting in isolation. Just as the US Supreme Court appointees come from political decisions, so do Fed appointments. Central banks in non democratic countries do not act independent of totalitarian powers.

I agree central banks will push money supply; however, I doubt it will overcome the loss of liquidity from derivatives collapsing. I could be wrong at many junctures and assumptions.

Certainly, in the long term as regions of Asia, South America and the Asian subcontinent consume more resources, then commodities will be in short supply with rising prices.

In the relatively short term of months and not more than a couple of years, hindsight will be claimed as foresight by most.

The US has not and will not remove the forces kept around the world. These bases constitute forward positions to project our superpower might, image and trade.

Any possibility the US may need to pull back troops due to budgetary concerns? Just a practical observation--irrespective of politics.

KurtS

There was a great book around 1987about the failures of empires. One of the author's (Paul Kennedy, The Rise and Fall of Great Powers) conclussions was that empirial military overreach would eventually be unsustantable in the waining empires because of diminishing wealth. Certainly the British withdrew troops and bases because of budetary concerns after WW II.

I speculate that China will rise up in 20 years or so and maybe we will withdraw. The US has shown great flexibilty and adaptability to adjust to changing economic and political realities over time. I will not sell the US short as a Great Power, a superpower that projects force.

jeffolie-

Agreed to disagree. Surely we'll find out which theoretical position proves true soon enough. My only point in arguing is that I fear people might prepare for deflation only to get burned worse by inflation. My prediction for the future is a rising risk of stagflation as energy costs establish ever higher floors.

KurtS, I'm not sure budgetary concerns will directly indicate a miitary pullback, although costs will be invoked by politicians for political cover should they ever decide to do it. The larger reasons would be strategic in nature. That is, a marked shift in US foreign policy towards isolationism. This would probably not happen unless the US suffered a severe shock that forced a major turn inwards. Something like a pandemic, major natural disaster (on a regional scale, like a New Madrid earthquake), a catastrophic political crises (like a major state or region trying to seced), or of course another Great Depression.

“...or should I say Cal-eidoscope and fantasmagoria of prehistoric images and thoughts.” — Michael Holliday

It’s “phantasmorgia.” That’s a good fucking word regardless; you get bonus points for using that one dude.

Thanks! I was thinking of Fantasia the Disney movie...Phantasia?

Randy H

Democraghically and economically the vast two paycheck households have no choice but to ride out the collapse whether its deflation, stagflation, hypeinflation or currency collapse. Households have a negative savings rate with little money to prepare for anything on the event horizon. Most of the wealth of households resides in their residence's equity. The upper class may chose to prepare or not since most of the savings and fungible assets reside amongst them.

OC Homeowner Says:

January 14th, 2006 at 11:08 am

Not all Americans are spoiled and only work into retirement because they love their jobs. My mom (65 yrs old) owns her own small business works it everyday herself and is not getting rich. She barely eeks out a living for herself, pays 950 a month for a 1 bdrm apt and can’t afford to get gall bladder surgery that she needs because she has no health insurance. She is too proud to take hand outs from me or my siblings although we try to help her in round about ways
My dad had EKG changes, 8months ago and in the usa he would have been worked up galore and would have been fixed surgically. However he was in india and the best cardiologists( these are my teachers in india and they do excellent clinical work withour resorting to expensive tests) told me that their was no need for me to worry. so I came back to my job in the usa. If that patient presents in the USA with similar problem they would work him up and not wait. 6 months alater my father called me and said he was having chest pains, so i panicked and went back this time i insisted that everything be done. Sure enough the angiogram showed triple vessel disease. Now we had to decide where to get him operated. The us was out of the question because even though i am employed and have full insurance in the usa insurance companies cannot add non us citizens on to the health. insurance,. BTW the best cardiac care in usa is at the Cleveland Clinic, (where i was a resident). or at the texas heart institute. there are no doubts about it. By the way this is not professional advise and i am not payed by either.

So we looked around in India. there was one surgeon who was in bombay called bhattacharya and he it seeems does the best in beating hearts and doing surgery on beating hearts is arelatively new technique mastered by a few. Since we live in hyderabad, we wanted somebody in hyderabad and so i started asking cardiac anesthesiologists for insider information. You see anesthesiologists are watching everyone in the room and wanted their opinion. they all said that dr Gopichand was the best surgeon as well as a good human being. being the doc in the family i took the decision to go to dr gopichand because i felt he truly had the best periop outcome in hyderabad. hE ACTUALLY DID A GOOD JOB AND MY FATHER HAS BEEN DOING OK SINCE OCTOBER 2005.
The total cost was 5000 us $. all cash. No credit accepted.
No problem because dad had worked in the bank and has retired now and was reimbursed for it. If not i would have taken care of it
However my sister who is political philosopher said that we should consider Dr Cherian. Dr cherian was working at the railway hospital basically its a free hospital. HOWEVER THE GOVERNMENT AT THE BEHEST OF CORPORATE HOSPITALS DENY RESOURCES FOR POSTOP CARE AT THE RAILWAY HOSPITAL. SO THE DOCTOR TECNICALLY CAN BE GOOD BUT IF THE HOSPITAL IS NOT EQUIPPED TO TAKE CARE OF ALL THE POSSIBLE SIDE EFFECTS AND MAY HAVE FIORCED DR CHERIAN OUT OF PRACTISE.

Actually in loudobbs there was a piece about medical tourism to India. That segemnt stated that americans are traveling to india and getting 5 star treatment at select hospitals. One has to exercise a lot of caution though. the medical industry is not regulated and therefore outcomes and care not gauranteed. Medicoplegal industry is zip. the docs word is it. But will u blame the american public for not using corporate hospitals in the usa and exploring other options if the only way to pay for all this in the us is declaring financial bankruptcy?

I think The corporate hospitals need to do bette to control costs and not just take away everything that ur mother earn in her entire life in the name of treating her. Increasingly americans are questioning thisstyle of practise and the are seeking out alternatives.

The problem with health careis that if it monetarily driven, it starts feeding into this cycle of profits and more profits and hence will lead to its downfall.
Please dont het me wrong medical innovations of the cutting edge tecnology are only and only availablein the usa. The rest of the world copies everything that is patenetd in the us. So i totally agree with u in that the usa medical care is at a level taht u cannot duplicate thateasily.

So I hope this helps. take care.

Hey, Hessesfan, great story!

But could you make it just a little but longer next time? :-)

Hey, Hessesfan, great story!

But could you make it just a little BIT longer next time? :-)

Santa Barbra? Is that place still reserved for the leisure class and servant hispanics? Last thing I heard about that place was that it had very few jobs and sky high housing costs. You could live there if you didn't need to work. It's a beautiful place though.
It does seem a little ironic that X would live there and have such complaints about San Jose.
I've heard lot's of complaints about San Jose but not for Surfer X'S reasons. I often here that people in San jose tend to be unsophisticated, farmer like.
It's a town of about 1 million people that are at most 2 generations off the farm or orchard as the case might be. Ask yourself if your grand parents worked on a farm? If so, you might be from San Jose

i am having a ball here in buenosaires. My best time was when i played chess for 2 pesos . so much fun because i won. But let me ask u, do these guys at the square loose to make their customers happy? or is it my paranoid brain giving lenghthy explanations to michael,
By the way forget the real estate bubble and enjoy thereal things here. i have smelled the roses and they a rose is a rose.
argentina and brazil are really , really fun. i walked on the streets here at 3 am in the morning and it looks safer. BTW women walk alone at 3Am.

btw can randy or jess explain more about qtw
thanks

Anyone watch the show on chanel 5 about bay area housing costs?
It was pretty lousy. It was all old news. As if people dont know about housing prices in the bay area being too high. And they had the nerve to imply that they might continue to go up. They implied that a natural disaster could cause prices to drop. They also educated everyone on how high interest rates can cause prices to decline. It was geared to someone with an IQ of about 75.

I'm starting to see signs of problems. A recent buyer in my neighborhood
has a for sale by owner sign up. She's been here for less than a year and paid way too much for her shitbox. I guess she realizes it now and is trying to get out anyway she can. I think her world is fucked. She is clearly having a financial crisis.

I'm still surprized at people with so much buying power doing such stupid things. Then I think about it. She's just a hardworking nurse that wanted to own a home. She's not an economist or a financial wizard. She just got tricked into buying something that she really couldn't afford. Every body got paid and she got stuck paying the bill. Every month she's got to come up with $3k plus after taxes, food, utilities and such. She tried renting it out. People are actually renting it now. I guess the negative cash flow is just wearing her down.

That's my impression of what's probably happening to many people. It will begin to happen to many more as the months go by.

sj_oldtimer Says:

"She’s just a hardworking nurse that wanted to own a home....She just got tricked into buying something that she really couldn’t afford. Every body got paid and she got stuck paying the bill. Every month she’s got to come up with $3k plus after taxes, food, utilities and such."

"...I guess the negative cash flow is just wearing her down.
That’s my impression of what’s probably happening to many people. It will begin to happen to many more as the months go by."

Exactly. And the slow-burn crackup as a natural concomitant to fiscal irresponsibility: the day of reckoning.

The multitudes of new buyers--what, 60-70+% are Interest Only and Adjustable Rate Mortgage bag holders?--are sitting ducks and mere grist for the housing mill, set on granny's farm high atop Mt. Hamilton.

I think when the engines of job growth and high-tech prosperity begin to sputter a little, in the direction of recession, it will be the spark that starts the gears of the housing mill turning in wheels of burning fiscal flames.

Then will begin the shrill, slow grind of the hapless, helpless American dreamers into fine grist for the unsavory batter of a tall stack of piping-hot, California buttermilk pancakes!

When the process is well under way, I will raise a signal flag of requiem ensuing with the words, "Pass the syrup, damn it. I'm hungry!"

Then all will know the violent truth that violation of the immutable, financial laws of physics come with a steep price.

"The whole thing started since I VIOLENTLY REACTED to the PURPORTED NOTION that 100K is HIGH SALARY …." -- Ha ha

But statistically it is.

Ha Ha, well shit, if you make that much, everyone else should also. Just like when you walk outside in your tan Dockers and everyone else has tan Dockers, it's freaky man they way you predict what everyone else earns. Just odd. I for one applaud your out of the box thinking, your ready ability to disregard all published data, you $ir are a trendsetter and I for one am continually enriched by your continual boasting over what you make. I am marching into my boss’s office tomorrow and demanding a raise. I say all those other assholes out there that actually "believe" things like census numbers, data published by leading business schools and anecdotal evidence are just ball jiz sniffing whiners. Fuck man do you think $ilicon valley got where it's at, replete with >100K salaries for even the most common of cube farm sitter by actually paying attention to stupid little things like data? I mean after all from your vantage point 160K is the norm.

Let me know what you wear to work tomorrow because I want to be normal also. And continue the good work. I'm sorry if I violently reacted to the neverended hammering from your diatribe, but I can't seem to give up my desire for data. Fuck I guess that's why my salary is so "average".

X, et all,
I feel your pain about these 100k jobs. I deal with it every fucking day.
And I must tell you that there are some sorry sacks of shit making 100k and above. You would be surprized. I know their salary's because some have told me and others I know because of knowing their title and the salary range at my company for that position. I have seen resume's of some of the 100k employees. When I read them I sometimes feel they are underpaid at 100k. They've designed this, they have taught there, they have a patent for this and that. They have an MS from here and BS from there. They have 15 years experience. I work with these people every day and often think that they are total slackers most of the time.

These people are not unusual in my company. My company employs about 35000 employees.

I'm talking high tech jobs. I'm talking about people that survived layoffs.

I bet the average worker in Santa Clara county is NOT a high tech worker.

I've heard the average salary at my company is 60k. I dont remember where I heard that or when.

Knowing what I know, I wouldn't doubt for a minute that HA HA pulls 160k as he describes. Perhaps he might take a pay cut if he left his job and went somewhere else. I feel that way about many of my co-workers.

SJoldtimer, I make just a hair under 100K and am basically a recent graduate. However, I have multiple graduate degrees, patents etc blah blah blah. All my friends, who work at all the industries in the bay area, bio, tech, defense etc all make about 70 or so. Yes, I think there are a substantial number of over 100K folks, but these are management, or programmers/chip designers with a very specific narrow focus. The vast majority of us peons make under 100K. I don't know what Ha Ha's gripe is, my wife doesn't work, and while we can't buy a house, we have a great lifestyle.

@HaHa, I am totally in line with your opinions. The whole thing stinks, but the sheep just don't seem to get it. Borrow means you have to pay back, it isn't your money.

Can't

We

Just

All

Get

Along?

No...

jeffolie says

the fed will "monetize debt as the lender of last resort."

What does that mean?