patrick.net

Someone said fairly recently that you cannot replace labor with capital, it's not sustainable, you can try though. At the same time we are making it against the law to be poor, or live in tent cities, etc.

Government spending,(largest employer) as it continues to drop (and it will), may or should lead us into another trench.

Health care has hyper inflated in costs, it's not an industry, it's a monopoly, not even small practices could survive. Nobody can afford to pay the costs, so government picks up the tab.

Strange country, strange times.

"dotcom was small beer compared to houses.
leverage was minimal so it was just a big electronic gambling parlor. Money leaked into the bay area in the late 1990s, causing our housing bubble to lead the nation, but other than that it wasn't terribly deformative."

I'm not saying it is in the same class by any means but I would say that bubbles keep getting larger.

"housing, on the other hand was the mother of all stimuli.
the home ATM was 8% of GDP during the Bush Boom:
http://research.stlouisfed.org/fred2/graph/?g=1De
$800B ~ $1.1T/yr of money influx into the population in 2003-1H07:
http://research.stlouisfed.org/fred2/graph/?g=1Dg"

I believe you man. Although I would say are we talking housing or credit itself? Credit extends into nearly everything.

"dot com took out people's portfolios, but there wasn't much employment in dot com stuff.
Unlike housing, construction saw a million jobs added:
http://research.stlouisfed.org/fred2/graph/?g=1Dh
plus who knows how many real estate ladies, loan brokers, etc had a taste of that trillion-dollar flow from housing -- easily another million. California alone had 500,000 licensed sales agents in 2005."

Which figures now NAR has a whole propaganda machine trying to claim housing automatically makes jobs..but their own commercials state it takes in fine print it takes the construction of two homes to equal one job.

mdovell says

"dotcom was small beer compared to houses.
leverage was minimal so it was just a big electronic gambling parlor. Money leaked into the bay area in the late 1990s, causing our housing bubble to lead the nation, but other than that it wasn't terribly deformative."

So if you cant invest in the inflated and highly risky stock market where does Joe 6 Pack invest ? Their home.. and they expect that same `10-15% appreciation year over year.

The dot.com bubble contributed to the nation turning to using their home as a primary investment.

corntrollio says

Unclear. I see the housing bubble as obscuring the aborted bust after the dotcom bubble. We never had a normal recovery, and what we saw was just a phantom recovery caused by credit. I think this is why everyone says we could get out of this by blowing another bubble.

Yep.. never corrected.

I second that.

thomas.wong1986 says

Their home.. and they expect that same `10-15% appreciation year over year.

The dot.com bubble contributed to the nation turning to using their home as a primary investment.

But it seems like most people used home equity to finance spending, not create investment. If you bought a BMW, went on a big vacation, bought a boat, etc., all that so-called "investment" was for naught. It's not like most people spent the money on healthcare, college education, and other worthy things, although maybe the smart ones did.

The DOW is headed to 7,000.

YIKES!

corntrollio says

But it seems like most people used home equity to finance spending, not create investment. If you bought a BMW, went on a big vacation, bought a boat, etc., all that so-called "investment" was for naught. It's not like most people spent the money on healthcare, college education, and other worthy things, although maybe the smart ones did.

So true...

corntrollio says

thomas.wong1986 says

Their home.. and they expect that same `10-15% appreciation year over year.

The dot.com bubble contributed to the nation turning to using their home as a primary investment.

But it seems like most people used home equity to finance spending, not create investment. If you bought a BMW, went on a big vacation, bought a boat, etc., all that so-called "investment" was for naught. It's not like most people spent the money on healthcare, college education, and other worthy things, although maybe the smart ones did.

I believe the smart ones where thinking "WTF is going on here?" in 04/05 and started reading Patrick.net

HousingBoom says

You need to Google "hyperinflationary depression" and read up on it. A depression does not need to be deflationary. Who's smoking crack now?

We're not going to have a hyperinflationary depression because all of our debt is denominated in our own currency. Countries who have experienced hyperinflation have had their debts denominated in some other currency (Weimar: gold, Argentina: USD, etc) so printing more of their own currency doesn't actually retire any debt. In our case printing money DOES retire debt - yes interest rates will go up but this will simply cause deflation to accelerate as variable interest debt will be defaulted on.

When thinking about hyperinflation, remember that this is a political event. The Fed cannot cause hyperinflation, only Congress can. And let's think about who owns most of the debt. That's right, rich people. What happens during hyperinflation? Debts are paid back with worthless dollars. Rich people do not want to lose their assets and rich people control the govt. Therefore we will not have hyperinflation. Instead we have calls for "austerity" so the rich people will be paid their money.

Deflationary depression here we come.

grywlfbg has great wisdom.

grywlfbg says

That's right, rich people. What happens during hyperinflation? Debts are paid back with worthless dollars. Rich people do not want to lose their assets and rich people control the govt. Therefore we will not have hyperinflation. Instead we have calls for "austerity" so the rich people will be paid their money.
Deflationary depression here we come.

One of the best arguements for a deflationary environment I have read.

I am so happy to have found this website....finally the truth be told!

grywlfbg says

Deflationary depression here we come.

It is pure common sense, how can we go the other way with such a massive load of debt. I just don't get it.

bubblesitter says

grywlfbg says

Deflationary depression here we come.

It is pure common sense, how can we go the other way with such a massive load of debt. I just don't get it.

This is what Charles Hugh Smith has been preaching.
http://www.oftwominds.com/blog.html

Cui Bono?

I think the title is a bit too dramatic for this thread. It ain't even depression we have.

grywlfbg says

When thinking about hyperinflation, remember that this is a political event. The Fed cannot cause hyperinflation, only Congress can. And let's think about who owns most of the debt. That's right, rich people. What happens during hyperinflation? Debts are paid back with worthless dollars. Rich people do not want to lose their assets and rich people control the govt. Therefore we will not have hyperinflation. Instead we have calls for "austerity" so the rich people will be paid their money.

Deflationary depression here we come.

Don't take it from me. I'm just an average Joe behind a computer. Peter Schiff and Marc Faber thinks it's very possible we will see hyperinflation.

John Williams from Shadow Stats also thinks it's eventually a 100% certainty.

I do believe we can see a massive deflationary collapse before and/or after hyperinflation. To say hyperinflation can not happen in the US is simply incorrect. It can happen but we don't know if it will.

Peter Schiff: Dollar hyperinflation is coming unless policy direction is rapidly changed
http://www.cobdencentre.org/2010/10/peter-schiff-dollar-hyperinflation-is-coming-unless-policy-direction-is-rapidly-changed/

Marc Faber - 100% Sure We Will Have Hyperinflation
http://www.youtube.com/watch?v=7r9o3jmyoaA

You can easily find dozens of 'investment advisers' who will tell you what you want to hear. Just like religion, join the one promising life ever after! haha.

I don't trust the ones who never reverse course and constantly pitch the same line. Such as 'buy gold!' (ok that was a good one, but now it seems to be topping?)

Kunsler is a good writer but a useless doomer peddling books IMO (he predicted end of world from the Y2k Bug hahaha what a dope!)

Schiff I don't trust due to his fathers life of legal convictions - jail? - according to rumor - and who was also an 'financial adviser' or so the rumors are (wesley snipes scenario?).

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

Mish I don't trust - always 100% negative? And political rants are useless. But I like reading him.

I do like that guy from iTulip - Eric Janzen?. And I like Charles Hugh Smith - but they are confirming what I want to believe - dangerous. Must read everything and consider all possibilities then hedge accordingly right?

Really - I don't trust anyone! I do like Robert Campbell for RE investment but thats a small niche now since free EZ $ is gone.

Did anyone see Moody's credit downgrade coming? Well, I can honestly tell you I knew it was almost a 100% guarantee it would happen this decade. It happened much sooner than I thought. More downgrades are coming down the pipe (just like Greece). Let's just say that this country is going under and too bad the majority out there are still asleep and in denial. Just give it a few more months and you will see the next big leg down in the US economy take place. I hope I'm wrong but I'm afraid I won't be

HousingBoom says

Don't take it from me. I'm just an average Joe behind a computer. Peter Schiff

Those guys you quoted don't have perfect prognostication records.

I fully believe the system would tolerate the Fed repeating another dose of wage-price inflation like what we got 1970-1980:

http://research.stlouisfed.org/fred2/graph/?g=1GW

However, I think few people actually understand what the 1970s inflation event was all about. My thesis is that compared to now, things were much more in fiscal balance and there was a lot of expansion still left in the cards.

http://research.stlouisfed.org/fred2/graph/?g=1GX

Anybody who's 100% certain of anything going forward is just trying to sell you something.

Bellingham Bob says

Anybody who's 100% certain of anything going forward is just trying to sell you something.

Very true. Only time will tell

grywlfbg says

That's right, rich people.

Sorry, I believe the proper term is Job Creators.

Bellingham Bob says

Anybody who's 100% certain of anything going forward is just trying to sell you something.

Sing it, Brother Bob. Quoting Peter Schiff as any sort of authority is misguided. These kinds of people talk their book.

bubblesitter says

grywlfbg says

Deflationary depression here we come.

It is pure common sense, how can we go the other way with such a massive load of debt. I just don't get it.

I agree. I think it's much more likely to be deflation or only moderate inflation. The hyperinflation argument seems far less likely -- what is the real mechanism? Currently we are still working off credit, i.e. deflation due to the burst of the credit bubble. If the government is throwing cash into the mix, like Japan, it is largely offsetting the credit. The inflation already happened during the bubble when credit increased significantly.

btw, I really like Schiff. He was right when it mattered, in 2007-2008.

I'd like to think the CNBC clowns knew he was right, but had to toe the party line regardless. The mere act of giving Schiff airtime was all Fox/CNBC had to do to inform the clueful.

Bellingham Bob says

btw, I really like Schiff. He was right when it mattered, in 2007-2008.

Anyone can be right for short periods of time. All it takes is staking out a position that is plausible.

Just talk to John Paulson:
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/08/10/bloomberg1376-LPOFMK1A74E901-4Q2JPC453VOJE0PMSOCLM0O906.DTL

Or if the Chron is too socialist for you, the WSJ:
http://blogs.wsj.com/deals/2011/08/19/guess-whos-getting-crushed-by-hewlett-packard-john-paulson/