Thursday open thread
Do you not see that Satyr gone quite mad,
how full of pride he is, a font of vices
that makes my heart consume itself with scorn?
What sort of bonfire will you have today?
November 29, 2012 - 8:01 AM
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November 29, 2012 - 8:01 AM
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Tuesday, May 21, 2013
THE ROANOKE TIMES
Maybe what has been made complicated is really kinda simple?
“We had a huge building boom that went bust. Instead of building houses at a near record pace, construction fell back to the lowest level in 50 years due to enormous oversupply. Similarly, the consumption boom that was driven by $8 trillion in bubble generated housing equity faded when that wealth disappeared.”
What’s Holding the Economy Back? The Collapsed Housing Bubble, End of Story
I think maybe we have all come to accept bubble after bubble and the recession that brings because the “people that matter” (in their own minds) are almost never really harmed by them.
I am struck by the idea that people want this Congress, who has been unable to walk and chew gum successfully, to solve all of the so called “entitlement” reform, make tax reform and fix budget/spending problems before December 31st. We have crossed over into some parallel universe apparently. Does anyone REALLY believe they can do it?
Of course they can’t do it, Sandi. Yet the supposed “leader” that just got re-elected seems to think they can.
Says a lot about him, doesn’t it?
No he doesn’t think they can do it either. That is why he has asked them to do it piece-meal and do the stuff they all supposedly agree on first. I think he, like most of the nation, is well aware what he is dealing with in this Congress. No one I know has any faith in this Congress.
1 – Sandi, you’re exactly right. It is insanity to think that a bubble-driven economy is healthy and/or sustainable, and it is a whole ‘nother level of insanity to propose the creation and sustainment of economic bubbles as an economic plan.
To #4 (89Hoo): Alas, re-inflating the bubble appears to be exactly the plan of the FHA and the Fed:
http://ochousingnews.com/news/bernanke-pledges-to-do-what-he-can-to-reflate-the-housing-bubble
http://ochousingnews.com/news/the-fha-is-giving-loans-to-ponzis-to-reenter-the-housing-market
OC Housing News is snarkier at times than I like, but like Dr. Housing Bubble, they show real insight into how housing markets and the flow of debt/money work. They’re both deeply skeptical of the quality of the Fed/FHA efforts.
The intent of those efforts is to “improve the economy by encouraging the home-building business, and to help more struggling homeowners stay in their homes”. The actual effect is to push an entire new generation of homeowners into houses that will end up underwater once the stimulus efforts are ended, while inflicting higher inflation on the rest of us. The only people who truly benefit from the Fed/FHA actions are the banksters who helped get us into this mess in the first place.
5 – yup. Unfortunately, the policy makers are being driven by inflationists and bubble-blowers who have no understanding of economics.
I think they are all, the Fed, the financial industry and “inflationists and bubble-blowers” and the people, led by the desperation, Armageddon, fiscal cliff, we cannot fix this, rhetoric that has us ending with only 236 years under our belt. The politics of the afraid and the “don’t just stand there, do something” kind is a dangerous thing. I have no faith in any good legislation forthcoming, none at all.
7 – The politics of the afraid and the “don’t just stand there, do something” kind is a dangerous thing.
hmmm….are you saying we should sit and do nothing?
To #8 (89Hoo): Hah. The housing bubble creating literally millions of extra homes, pushing housing vacancy rates from a historical norm of 1.7% to a high of 2.9%. The end result was a massive supply glut. Literally more homes than people who could afford to buy them.
When faced with this predicament, we essentially have three choices: [1] Wait until the population grows enough to fill those extra houses (i.e., sit and do nothing), [2] Tear down those houses in an extreme “window breaking” frenzy (alas, the broken window fallacy must be remembered), or [3] Try to re-inflate the bubble with housing tax credits, artificially suppressed mortgage rates, and artificially relaxed lending standards.
Option [1] would actually have worked the best. Given the obvious foolishness of option [2] and a “do something!!” mindset that pervades Washington, though, our “leaders” selected option [3], wasting trillions of dollars, massively distorting the economy, hurting ordinary citizens, and putting us further into debt.
I am “saying” what I said, I have no faith in any good legislation forthcoming, none at all. The histrionics, the distortions and continuing talking points, the game of chicken, and the umpteenth round of the blame game, none of which leads me to have hope they can tackle the mess and certainly not all at once in some massive “package” before December first. Not this Congress.
9 – Brian, since the housing bubble was caused by government action, it calls for a little more than simply doing nothing. Government needs to reverse/repeal the policies that caused the problem to begin with – guaranteed security on mortgages, quotas in lending practices (as opposed to policy), inflationary monetary policy, fractional reserve banking practices, etc. – and THEN let the market correct (essentially sitting and doing nothing).
10 – what sort of legislation WOULD you support?
To #11 (89Hoo): Aye, agreed. I was thinking of “doing nothing” as an alternative to the absurd stimulus actions that are in effect today (i.e., QE3 and the FHA’s relaxing of lending standards), but you’re right. There are numerous other faulty policies that have been around for a while that also should be unwound.
Unfortunately, anyone suggesting some real alternatives is quickly branded as a racist who hates the poor.
Given the reality does not look nearly as pretty as the words on the page, I can not only understand why the government and the Fed have chosen “sustainment of economic bubbles as an economic plan”. I can agree with it being the best worst option.
If the government did “reverse/repeal the policies that caused the problem to begin with” which was not IMO, “guaranteed security on mortgages” (as if), “quotas in lending practices” or “inflationary monetary policy”, the economy that you all like to use as a cudgel would be even worse and for far longer. While there are many, mayhap you among them, (as I said in post #1) who would never be really harmed by those changes, there are millions upon millions more who would have been/would be.
As I have said many times, we reached a tipping point and just kept going and reversing course or redirecting the course is not going to be the easy fix that so many demand, nor will it be quick and agreed to by all.
Since you asked, legislation I would “support” would be a sensible, incremental, phased in redirect that does as little harm to those who can least afford it as possible while setting us back on a sustainable path. I do not under any circumstance believe a big “omnibus bill” full of complicated trade offs, tits for tats and convoluted “political” solutions guaranteed to bite us in the behind at the first opportunity (in other words, the same kinds of legislation we have had for at least thirty years, has a prayer of success.
Members of Congress may be wealthy, have wealthy donors and even be well educated, but they are damn sure not smart.
If those “suggestions” mainly harm minorities, the working poor and the poor, then yes, you are undoubtedly correct Michael.
The more I listen to the TP/R Congressmen talk, the more I believe Krugman nailed it back in March!
“…there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?
The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait-and-switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.”
http://www.post-gazette.com/stories/opinion/perspectives/paul-krugman-starve-the-beast-fiscal-calamity-is-the-gops-plan-to-shrink-government-234845/
It makes so much sense when you see it in the entirety.
I don’t pretend to know any quick or magical fix to the housing aspect of our economic doldrums.
The only real solution is the elimination of excess inventory. Then, not to repeat the same mistakes.
The former will take time, with economic policies that promote growth & provide for upward mobility. The latter will require the former & policies that promote as much reasonable access to qualified buyers…without another “entitlement” perspective resulting in another “bubble”.
So given the choice between pouring gasoline on the fire -even when there is nothing left to burn – and letting the fire die out so the house can be rebuilt, you choose the gasoline, on the basis that if the fire is allowed to die, there will be nothing left. Such is modern economic thinking today, indicative of a lack of understanding of basics principles and of history. But full of dangerous compassion.
Considering the rhetoric of the just finished campaigns, no one on the planet can afford “letting the fire die out so the house can be rebuilt”, we cannot afford to wait one more moment on jobs, solutions and fixes. There is a “cliff” the lemmings are headed for, remember?
IDK what “modern economic thinking today” has to do with the decisions of the past thirty or so years (not much is my guess), but the reality is, as I stated, we passed the tipping point and went down some drain evidently no one saw, and now we have only short term fixes and quackery to rely on.
What you want no longer exists in reality. We created the disturbing imbalance between wealth and poverty. Created the endless cycles, bubbles, and political solutions, that were no solution at all. You can claim it was motivated by “dangerous compassion” but I think greed, hubris and ultimately the lack of intellect that runs rampant in the political world that is to blame.
I agree that for at least 30 years, many in Washington have lacked principles, as well as understanding of basic economic rules. The number one lesson history taught them was that we, the voters, forget, forgive and mainly vote on other issues.
Frankly, I do not think anyone can fix this. It is the new normal.
17 – Krugman is right that the GOP offers nothing different than the Dems; they are merely quibbling over the amount of gas to pour on the fire. Krugman, like most modern economists, favors that, and favors bubbles and inflation (calls for it, in fact, often explicitly). So his beef is not truly with the GOP gas can…he is showing his stripes as a CPUSA/Dem Party operative. He certainly can’t claim to be an economist.
Not that I doubt your authority on the subject 89Hoo, but Krugman is the one with the credentials and you are an anonymous blogger.
Everyone through the looking glass, is operating within the system that is because the system everyone wants it to be is no longer available.
The system libertarians want is not going to happen in the United States (or anywhere else that I can see). The system the liberals and conservatives all understood is long gone. It is what it is. Calling people communists is not helping your credibility or the integrity of your argument.
Krugman, nor the Democratic Party created the bubble/recession pattern or the way it is used and abused by those in power to do so.
“Imagine” is a beautiful song, “What if…” is a beautiful sentiment, but few people actually live it.
“Imagine” is an awful song. Just sayin’.