patrick.net

"None has the balls to challenge orthodox, mainstream nonsense"

I like that. You post an article about an economist that is challenging mainstream views and then finish by saying the above statement and calling them pathetic individuals.

By definition, most economists will agree with mainstream views. Otherwise it wouldn't be mainstream...

Gerald Celente is an intelligent and accurate forecaster of economic trends. He accurately identified the run in real estate prices as a "bubble" way ahead of anyone else that I know of and predicted its ultimate collapse. He has also predicted the collapse of commercial real estate, beginning in 2011 when CRE loans begin to reset en masse. What's worse, Celente makes a very well documented case that the commercial real estate debacle is much bigger and far worse than the residential, with far reaching implications. He believes we are already in a depression that will soon dramatically worsen and will ultimately make the Great Depression look very lame in comparison. Personally, I have found his analysis on the current economic situation to be very credible and sobering to say the least.

RayAmerica says

Gerald Celente is an intelligent and accurate forecaster of economic trends. He accurately identified the run in real estate prices as a “bubble” way ahead of anyone else that I know of and predicted its ultimate collapse. He has also predicted the collapse of commercial real estate, beginning in 2011 when CRE loans begin to reset en masse. What’s worse, Celente makes a very well documented case that the commercial real estate debacle is much bigger and far worse than the residential, with far reaching implications. He believes we are already in a depression that will soon dramatically worsen and will ultimately make the Great Depression look very lame in comparison. Personally, I have found his analysis on the current economic situation to be very credible and sobering to say the least.

There are many people who are simply negative about all economic matters who have been right about recent events.

I would only be impressed if they also caught the positive effects. If they knew there was a RE bubble, did they take advantage of it? Did they catch the Forex market chaos of the last few years? How about commodities swings?

I mean, really, it's incredibly easy to catch all of the bad stuff if you simply are bearish on everything.

simchaland says

This is where we could be headed. In that case there will be way more millionaires walking around our country.

Between when I was born and when I got my license the value of a dollar fell to 33c.

Life went on. Another such round would hurt the hereditary wealthy much more than the lower classes, the latter having much more in debt than savings.

The upper middle class dabbling in real estate would also benefit, but there are remedies for that.

Troy says

Between when I was born and when I got my license the value of a dollar fell to 33c.

And a 2009 dollar was worth only 18c when I was born.

Until I was 5 we were still living under the gold standard. I remember silver coins still in circulation, until everyone hoarded them.

I know the world hasn't ended and yet I remember the inflation of the 70's. I was only a child but I remember how hard things were for us as a family. And I remember that my 50c per week allowance bought less and less as the 70's gave way to the 80's.

When I started my first job, at McDonald's, I made minimum wage, which was $3.55 an hour. I quit that job when I found one that paid $4.75 per hour cleaning up garbage and road kill around our town. I thought I was making good money back then.

Troy says

Life went on. Another such round would hurt the hereditary wealthy much more than the lower classes, the latter having much more in debt than savings.

That's hard to know.

It could be argued that it would be somewhat different this time. If wages inflate less than prices of all the things we consume, including housing, then lower classes are screwed.

I know, how could it be worse than minimum wage now ? It probably couldn't. But middle class could be hurt. Where as now a middle class couple with average jobs can work hard, and maybe save money for their kids college, and for retirement, if they are frugal and wise about it. Not so sure what it would look like after another round of inflation.

And don't forget about all those who are renting, that don't even have the inflation hedge that comes from leveraged real estate ownership.

marcus says

If wages inflate less than prices of all the things we consume, including housing, then lower classes are screwed.

Theoretically, I think that's impossible because the rental housing good has a cost of production MUCH less than the current rental value, ie housing is the underappreciated shock absorber of the system.

(The cost of production determines the price level at which a good or service is withheld from the market.)

The cost of production of existing housing is the overhead of property management, plus any extra depreciation caused by tenancy (mainly carpets & paint).

$500/mo, tops, for any house in the Bay Area.

If supply starts exceeding demand, that's the basic rent level rents will adjust towards if not to. Theoretically.

The PURCHASE price of housing is relative to the rental value, modified by interest rates and the specific structuring of available financing, and the property tax burden.

If we as a nation keep letting "investors" distort the housing market, prices will be higher than need be. This is stupid, but we are a stupid people so hey.

marcus says

that don’t even have the inflation hedge that comes from leveraged real estate ownership

LOL, THAT'S WHY WE "HAVE" TO INFLATE IN THE FIRST PLACE! $10T of home debt secured by only $6T of homes!

Troy says

THAT’S WHY WE “HAVE” TO INFLATE

I understand.

Regarding how middle class and poor do with inflation, you only addressed rents, and even there you didn't address the finite aspect of land (not important to my overall point).

Let me try again.

If we have a round of inflation, and given the structural changes that have occurred in our economy(relative to developing high growth economies), who is to say;

Wages keep up with "overall cost of living"

If wages do not inflate as much as cost of living, then middle class and poor feel it more than the rich. The rich have plenty of non cash assets. Some in the short run such as staock and bonds might not do well with inflation, but in the long run they are assets (not cash) and they do fine.

Troy says

$10T of home debt secured by only $6T of homes

Increasingly, the most toxic of that debt is secured by the government, and all that matters is that eventually, in the long term the values of the homes exceed the value of the debt.

Here's an observation. If it turns out that it's not easy for the government to simply inflate to solve the problem, and if we have to go through a lost decade, then that means that the fiat money system, and to a lesser degree the Fed works. But if they can just easily inflate, then that means its all a game, and somebody is losing.

Somebody has to pay the piper eventually. Also the rich usually have big mortgages, to lower their cost of ownership, and to participate in the inflation hedge.

marcus says

If wages do not inflate as much as cost of living, then middle class and poor feel it more than the rich. The rich have plenty of non cash assets.

Almost by definition the poor rents their housing, and rent is their dominant expense. Regression of the lower class's real incomes will simply come out of the rents they pay to the upper/upper-middle rentier class that is preying upon them. That's my theory at least, it may not be dollar for dollar but I think this dynamic is understandable if not obvious.

As for the middle class, I think they on the whole have more debt that cash. The middle class emerged from the 3X inflation from 1970-83 fine, didn't they?

The upper middle class will do very well in inflation since as you say they're hedged well for inflation and their wages are as a rule inflation-proof too.

The upper class / pure rentiers will do well too as they own a lot of inflation-proof stuff like CRE etc.

But I don't know what I'm talking about here. I don't think anybody does. I think the economy is totally fucked and not unfuckable without policy changes that are politically impossible.

The PBT have roped us to playing this Monopoly game to the bitter end.

and if we have to go through a lost decade, then that means that the fiat money system, and to a lesser degree the Fed works. But if they can just easily inflate, then that means its all a game, and somebody is losing.

I agree with this. The Fed is playing hide the dookie with taking MBS onto its balance sheet, and I'm fine with that.

> THEY BAND TOGETHER. They do not think independently. They do not reason for themselves. They do not personally investigate - they only seek to CORROBORATE the wider consensus view. None has the balls to challenge orthodox, mainstream nonsense.

Herd mentality, there's safety in numbers, Better to be wrong with everyone else then risk having a different opinion that ends up being wrong. Everyone will remember the guy who was wrong when everyone else was saying the opposite. No one will remember when you were right when everyone else was saying the opposite. Employability, man, you can always say none of us saw this coming next time they apply for a job.

RayAmerica says

Gerald Celente is an intelligent and accurate forecaster of economic trends. ... He believes we are already in a depression that will soon dramatically worsen and will ultimately make the Great Depression look very lame in comparison. Personally, I have found his analysis on the current economic situation to be very credible and sobering to say the least.

He's a crackpot, it doesn't matter if he's right and can back up his position with endless proof. He's telling people what they don't want to hear, so they are not going to hire/listen to him. Take Cammer for example, he's entertaining as hell, and often wrong, but he tells us what we want to hear, so we pay him a lot of money and make him a star of a TV show.

Who would you rather listen to the guy who tells you dooms day is coming or the happy guy who saying happy times are here again.

TechGromit says

He’s a crackpot, it doesn’t matter if he’s right and can back up his position with endless proof. He’s telling people what they don’t want to hear, so they are not going to hire/listen to him.

History proves that many graves have been filled prematurely by those that state the truth that people don't want to hear.

Zlxr .... you nailed it. Great post!