host

willravel, in my 1935 article on HOLC, 862,000 were initially granted mortgages which averaged $2,320 each. Economic conditions were much worse than today, but a look in 1930's house prices clearly shows that people paid less than $6,000,on average, for their homes:
Are homeowners in California today earning 80 or 90 times the amounts earned there in 1935? If not, today's asking prices are unsustainable. Look at the stress on the new HOLC government bailout in 1935. At most, unemployment was in the low 20's percent, and the cost of almost all consumer goods had deflated. Even with tiny mortgage amounts, those "bailed out" were in arrears in huge numbers.

There is no foundation for hope of anything but huge price delcines. Lending requirements, conservative appraisals, a lack of liquidity, and foreclosures, potential buyer's price direction expectations, and pent up selling forces will kill valuations. They were liquidity driven, not by earnings fundamentals.

It is so obvious what will happen. The only "out" is to destroy what remains of the dollar's purchasing power. Lack of demand from economic decline will make it impossible to engineer the inflation that would be required to do that. They've tried, with $100 oil. I would not want to be elected US president, next november. It will be a nightmare term of four years.....

Charlatan

Host, am I missing something? When you say that "today's asking prices are unsustainable", you seem to be suggesting that the cost of housing should be controlled.

Is this the case?

__________________
"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke

Ustwo

The average salary in 1930-1939 was $1368 annually.

host you are really unclear on the concept.

I'd also add that the homes are a HELL of a lot nicer these days, most back then were very cramped, one bathroom, and would have much larger families in them.

You know I've only looked at 3 articles posted by you in several weeks host, one didn't support your point at all, one you completely misinterpreted or misrepresented, and this one you don't seem to understand.

I pay my dental assistants more in a week (before your kinds taxes) and more in two weeks real money (after taxes) than the average annual income was when you posted those house prices.

__________________
Agents of the enemies who hold office in our own government, who attempt to eliminate our "freedoms" and our "right to know" are posting among us, I fear.....on this very forum. - host

Obama - Know a Man by the friends he keeps.

flstf

Perhaps it is time for the 100 year mortgage. That should allow sellers to ask higher prices and still be affordable to many buyers.

I remember when I bought my first house in the early 70s. My father and grandfather thought I was crazy for taking out a 30 year loan. In their opinion 15 years was the max one should commit to. Of couse these were the kind of people who would save until they could pay cash for a car and never borrow money for one.

As it turned out that first house and others I bought later were some of the best investments I have made. Like the stock market real estate goes up and down but the overall trend over time is up.

I was joking about the 100 year loans but I wonder. At one time 30 year loans were considered irresponsible by many.

host

Will you please stop your bullshit personal attacks? I don't know WTF you are talking about. I do not think that you do. You posted no link to support your 1930's income figure.

I stand by what I posted:

In 2006, the median annual household income according to the US Census Bureau was determined to be $48,201.00.
http://pubdb3.census.gov/macro/03200.../new04_001.htm

The 2006 average household income is 35.23 times your $1368 1930's income.
Fannie Mae funds no mortgage loan higher than $417,000, (iI am taking pains to be fair to your "argument") so their average loan is lower than the average of all mortgage loans.

In my last post, I supported the figure of average mortgage size in the 1930's HOLC program as $2320. <h3>$172,000 is 74.13 times $2320....</h3>

In these
Above, it is easy to see that income in the highest average income city and in the lowest, of the 100 cities listed in the US, did not keep pace with rising home prices.

In Atherton, CA, and in Englewood Cliffs, NJ, average home prices were about 8 times average household income, in 2005.

The highest priced, post 1932 house on the list in my last post was located in Oakland, California, priced at $7150. Using your average national income figure of $1368, that Oakland house was priced at 5.22 times average national annual household income.

<h3>Please review your accusations in your last post. I've supported my contention that the core problem is that housing prices have risen dramatically above income, as have average mortgage size, compared to historical "norms".</h3>



In my post #18 here: http://www.tfproject.org/tfp/showthread.php?p=2354202
I responded to your criticism (attack) (contained in your post #15).


I did not respond to the criticism you levied in this post:
http://www.tfproject.org/tfp/showpos...3&postcount=57

..because I am weary from your groundless and needless critcism. In the post I authored on that thread that you criticized, I made it clear that the study that I cited data and conclusions from (you called it cherry picking) was biased towards making conclusions on wealth distribution, based on numbers of savings accounts opened and maintained by 25-35 year olds:
You may not have known that the study was part of a campaign to encourage savings accounts:
http://www.aicpa.org/financialliteracy/FeedThePig/

...or that it was irrelevant to make a comparison between savings accounts per capita in 2006 vs. 1985, because:

...in 1985, savings account interest rates were probably triple what they were in 2006, with inflation trending similarly in both periods. I posted that I was citing the income and wealth distribution figures in the study because they were current, and you attacked, me, as you did here, baselessly.

roachboy

host---these last couple posts of yours are very interesting...thanks for putting them together.

what i dont follow is the linkage you make between this credit crisis and the entirety of the post-bretton woods currency system. it seems to me to jump a number of levels analytically. could you spell out the steps involved?

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

host

Thank you, roachboy.

I think that the best way to start to answer you is to offer this:
The author of the above statements is quoted more than 30 years later, lower on this page:
"They"dodged a downturn after the 2000 Nasdaq stock index crash, which took blue chips stocks with it, over the two subsequent years, via a massive creation and pumping of liquidity into "hard assets"...housing, culminating in the sub-prime lending blow off top of 2005-2006.

For 20 years before that, culminating in the blow off top of paper assets in the 2000 nasdaq, the scheme was to destroy demand for hard assets:


This was written nearly 3-1/2 years ago, but it is a brief relevant piece of the puzzle, IMO:
In 1980, gold briefly peaked at $800+ per oz. There was a day in 1980 when an ounce of gold bought the DOW, the Dow Jones Industrials index (DJIA) of 30 stocks was at 800 points briefly in 1980. Silver jumped to $50/ounce. I can remember, in late 1979, long lines at metals exchanges (primarily coin shops and some jewelery fabrication outlets) of people queued up to sell their sterling tea service, heirloom flat ware, and hoarded pre-1965 silver US dollar coins, halves, qtrs., and dimes at prices that have not been reached since.

While gold has exceeded $800 this year for the first time in 27 years, silver has barely broken $16.00.

In the 80's and 90's, central banks were bent on putting gold back in it's box. They conducted surprise, huge auctions of their gold stores to drive the price of gold down, intending to keep the invetor emphasis on paper money and other paper assets. In addition, and probably with more impact, they lent their gold to speculators at one percent annual interest. The speculators sold the borrowed gold, further pressuring down prices.
To his credit, Ron Paul hounded Alan Greenspan whenever Greenpsan tesitified before the congressional committee that Paul served on:
So, with that background of contradiction and mismanagment in place in this post, consider that "they" will do anything to "preserve growth". They will contrive and implement ways to make house valuations seem higher than the trend and fundamentals dictate that they will go. I believe that the only way to do this is to massively inflate the dollar. First there will be attempts like this bailout to inflate housing and other "hard goods" prices, the exact opposite of the recent scam to drive gold prices down.

As the ecomomy increaqsingly fails, and the downturn grips the entire world and chokes growth and demand for petroleum and raw materials, as it already has for US housing units, what the FED fears most, will happen. Deflationary depression. The only question is how many will be destroyed first by the continued inflationary attempt....it's already killing the solvency of many who bought into this housing bubble which was a "hail mary" save in response to the 2000 stock and other paper assets downturn.

I don't see where they can find another speculative bubble to throw instantly printed out of thin air liquidity at. Too many individual and business credit ratings are imploding to provide a sufficient pool of "new marks" to lend money to for buying into the "next new thing"....so it's wreck the dollar to save housing and lower the burden of the accumulated federal debt.

Unlike Argentina in 2000, the US enjoys the advantage of most of it's debt being denominated (and owed) in US dollars. As the Fed prints more to pump inflation to preserve "growth", debt is paid back against unchanged dollar figured principle...lent at a dolalr worth much more than when paid back via excessively printed, fiat script!

Willravel

This is, of course, true. Especially in my area specifically. My home is unimpressive. It has two small bedrooms and a medium bedroom, 1.5 bathrooms, a medium living-room, kitchen, 2 car garage. All in all it's very mundane; not particularly fancy. If my home were transported to St. Louis or Milwaukee, it would possibly be worth $150k. Here in San Jose? $1.2m as of about 9-10 months ago. While it's true that people in the SF Bay area do make more than their counterparts elsewhere, we don't make it 8 fold. I don't think there are any people in my position in the midwest making $11,000-$12,000 a year. I knew that these prices weren't sustainable, just like I know the dollar is going to crash and I know that there will be a war for oil in South America... but like those things I had the foolish hope that it was a long way off. I kinda feel embarrassed to say that. I should have known better.

roachboy

host:

it seems to me that there are two ways to look at this...

either the problems under discussion here (and more broadly) follow from the ideology of endless growth, which is a core assumption in the gospel according to neo-liberalism--in which case the general characteristics of money since world war 2 are irrelevant...except insofar as the conversation about these general characteristics entails a concession of what i take as self-evident---that "free markets" are fictions, because they presuppose that exchange is a fact of nature and that its structure is optimally one that corresponds closest to what amounts to "natural law"--which does not exist.

so the exchange between rp and greenspan is one between two free marketeers, one of whom prefers for political reasons to position himself as a purist, and the other who is, by virtue of his position, compromised.

but the shared assumption between them appears to be that such markets are in fact possible, and that a monetary system hinged to the gold standard is, ideally, a system that would enable such fictions to unfold in the world that other people know about.

i dont buy it.

or you see a formal analogy between the characteristics of money since world war 2 and the neo-liberal ideology of endless growth....but nothing more than a formal analogy---the problem lay with the incoherence of market ideology as a whole, with neoliberalism as a whole, and should be addressed in a manner that enables us to look forward rather than back to the 1930s for solutions.


it seems to me that these lead you in very different directions.

looping back to the first point for a minute: rp's position clear, but is also so vague (that is, so lacking in correspondence to the empirical world) that it simply displaces the problem---so that, in rp-world, a "solution" to problems on the order of the subprime crisis---which is a speculation crisis----would entail a return to the gold standard (as if that is not just another form of fiat) or to some curious notion like good ole major douglas...the economic outlook that landed ezra pound in an ideological worldview that found its outlet on italilan national radio in the late 1930s and 40s.

rp wants money to be a thing. but money is a medium, and even if you link value to a second-order object, it is still a medium. as a medium, it hardly seems important whether there are predicates that one can attach to individual currency elements or not--the medium values would still fluctuate, would still be internally relative. so it seems that another way to think about dealing with the nested crises we move through would be to reject neo-liberal prescriptions and for nation-states to act to stabilize their own currencies rather than allowing their values to be determined to the extent they presently are by international currency market fluctuations. another possibility is something entirely other, a new system, which would be a version of a revolutionary socio-economic transformation. but there are no coherent proposals out there at this time that i know of that outline what such a new system would look like---so folk like rp run away, head back to some outmoded gold standard past as a model.




but what if the problem is more local than the entire history of monetary system logic since world war 2, and can be linked to the irrational assumptions particular to neoliberalism--regarding growth as eternal, for example, the collapse of expansion and equilibrium into each other. would this perspective not open onto a range of more available and implementation-possible options? like in the shorter run, more social-democratic type actions?

in other words, this is the world that neoliberalism has wrought.
why let that noxious, incoherent ideology and the politics based on it off the hook by fantasizing about a return to the gold standard?


i hope the questions i am trying to pose here are clear.
i have to go, so am posting them in this form....

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

Elphaba

Charlatan, if you followed the above exchange between host and roachboy, you'll understand my choice of the time machine. There is more chance of that than a "fix" of some kind.

For myself, I'm going to try to ride it out with the distinct possibility that I will be applying for a goat herding job in Chapala, Mexico.

__________________
"You can't ignore politics, no matter how much you'd like to." Molly Ivins - 1944-2007

roachboy

still kinda jammed up time-wise, but in order to block a wholesale slide to despair as to alternative ways of thinking about currency markets==assuming that the formal analogy between "fiat currency" and crises of speculation at more local levels holds as more than a formal analogy (i'm not convinced of this at all) there is the tobin tax initiative.

here is a global policy forum collection of links/information on the initiative:

http://www.globalpolicy.org/socecon/...rtax/index.htm

there's alot of material here to wade through, but a bit of time poking around will open up an entirely alternate way of thinking about international currency markets, their volatity, the relations between this volatility and political stability, and at least poses an alternative.

i used to do some work for attac a few years ago, and they were at one time a useful resource not only about this, but also for papers that debated, refined and extended this (and other) ideas...but the organization imploded a year or so ago and their archives have apparently disappeared from the web for now...the point is that this is not a new idea, it has been around and has been used for some time in the context of efforts to undermine neo-liberal hegemony.

funny that folk in the states dont seem to know about it.
kinda makes you wonder about the reactionary ideological bubble we move around in here, dont it?

i'll wait to see if anything happens from here before i post any of my views on this.

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

host

I found attac archives here:
http://archive.attac.org/indexen/index.html

...there are no links to US or Canadian branches or participants. I had never heard of attac.

It came to me earlier today that the contrived system of stocks and realty "aasets" that can only go "up"in valuation, along with the underlying economies that support them, went into "hyperdrive" mode....intense governmental, central bank driven interference, beginning about the time that it began to sink in that technology had made the old stimulus, "World War" obsolete with the exhibition of the destruction wrought by atomic and then even more popular thermo-nuclear devices.

I will have to think about the international currency transaction tax. I trade millions of dollars in securities annually, using the same small pool of funds to enter and exit positions. I hold some positions for less than a minute and others for days or even weeks or months at a time. You are talking about taxing "churn", which is what "trading" anything, is about.

Finding a way to tax profits and allow deductions for losses is always preferred, and easier said than done, compared to a transaction tax, I know.

It took a Dow Index crash from a 393 pt. high in 1929, to a low at just 41 points above zero, on July 8, 1932, to create an interest and preference for social-democratic reform, 70 years ago. I came across this "Time" capsule when I was researching the HOLC mortgage bailout:
Six months later, Roosevelt took every state, including Landon's Kansas, with the exceptions of Maine and Vermont...

I did not know until I read the above article and did some checking, that Alf's daughter, "Nancy Jo", was 20 year US senator from Kansas, Nancy Kassebaum Baker. She is currently married to former Tennessee Senator and former white house chief of staff, Howard Baker.

I read an article about medium of exchange on the mises.org site. Starting out with the desire for an exchange medium more convenient than a scenario where a man with an appetite for fresh fish acts upon his desire to have some on his table, by taking one of his most portable and valuable possessions, a telescope, down to the docks in search of a fisherman unloading a fresh catch from his boat who would be interested in owning said telescope.

As long as anyone wants to own something before they have all of the money to buy it, and as long as items rising in value are the most liquid items, further ing their attractiveness even more, and as long as people use money to "keep score" in a way similar to contests to see who has the biggest dick. instead of simply as a "store of value", and a "medium of exchange", there will be market bubbles and irrationality.

Housing valuations were much lower when mortgages were hard to come by and amounted to no more than 50 percent of total valuation of a property with repayment terms of five years. As terms loosened and lending ratios to total valuation dropped,and mortgage interest paid became deductible, more potential buyers could afford to bid on housing properties.

If the government central bank lowers it's key interest rate from six percent to one percent and relaxes lending terms and suspends oversight, and allows it's own GSE's like Fannie and Freddie to raise their lending limits to chase rising prices, is the government working to set housing prices higher?

How does a cental bank that has acted so irresponsibly pull back on it's subsidy and not "cream" those who bought at the top of a price "mountain" that the central bank itself, largely husbanded?

What is this "free" enterprise some of you speak of? I see enterprise driven by special interests and agendas, for the benefit of a few, at the expense of the many, but we don't talk about that in America.

Charlatan

I am having trouble getting my head around the bigger picture here. But what you seem to be noting here is that the value of houses was lower when the number of people who qualified for mortgages was lower.

In other words, there was less demand for purchasing houses. Is this not a classic example of supply and demand? As more people are able to buy their own homes, the demand for houses goes up and if the supply is not there, the price will rise.

I suppose an argument can be made that the price of houses could be kept lower by making mortgages harder to get but I can also see that there is another way to look at this.

Making mortgages easier to get gives more people the ability to own their own home. When one rents they are just paying for someone else's mortgage (typically). In paying that "rent" into a mortgage, a homeowner builds equity. It is an investment into their future.

To me the issue here, as always, is finding the right balance. Currently, the system has proven out of balance.

__________________
"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke

Elphaba

The system is out of balance, because artificially low interest rates made it possible to buy artificially increasing home valuations.

Both the interest rates and the home valuations were being manipulated to jack up the insupportable rise of "liquidity" that a "home" is supposed to represent. Do you see how that could become a house of cards, but the builder believes one more card can be added? (Took that analogy to the limit).

__________________
"You can't ignore politics, no matter how much you'd like to." Molly Ivins - 1944-2007

roachboy

i still dont understand the linkage between the mortage crisis and the international currency system in general--as i keep saying, i see an analogy, but that's it.

and i REALLY don't see the linkage that follows from this, between the mortgage bubble and fiat currency, particularly if you take ron paul's little dance with alan greenspan out of the equation.

the transaction tax on currecy market activity would tax transnational activity. the premise is that A cause [[ok, 2 CAUSES---grammar--sheesh]] of political/economic instability in the current context are: (a) the lack of regulation and (b) the scale and velocity of this activity.

the premise would be that BOTH follow from neoliberal assumptions about relatively open markets, how they behave, what they do, etc.. the tobin tax proposal is just a device to slow down the system and to use that money to counter some of the effects of these markets by funnelling it into development programs.

it isn't a structural critique--its a proposal to adjust the system in the direction of longer-term stability.

the main reason i brought it up is that it seems plausible at the level of premise and this premise--that the explanation for speculation-driven crises in the present context is the ideology that directly enables them--opens onto potential actions that address the actual problems.

it seems to me that is what is at issue in the analysis of these problems--moving gradually outward from the immediate context to find larger-scale problems/issue that are proximate enough to enable rational action.

i dont see ANY rational action following from ron paul's claim that the problem really is that because there is fiat currency markets aren't free enough.
and the consequences of thinking through what such a position would entail practically seem ridiculous---tying currency back to the gold standard as if that is not simply pegging one form of fiat to another seems to me to be dreaming. and if these "imperfect" free markets are already free enough to generate massive instability and very significant social consequences, why on earth would you want to get sucked into a position that pushes you to argue that they ought to be even more open?

but maybe i'm just not seeing something.
well, except that ron paul is a whackjob. that i see. but i didn't need this particular entry point to figure that out.
so i'm confused.
please help.

but i am wondering if this is something that should be split out from this thread--if the linkage between the subprime issue and international currency in itself comes undone, we should move the discussion.

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

host

roachboy, this is a work in progress. I want to respond to you with Elphaba's post as a masthead.

My reaction to your attac/Tobin proposal is anecdotal. I don't disagree with your rationale for such a tax, and I am not opposed to it.

I think central banks act in concert, the gold sales of Uruguay and Norway, at the bottom of the gold price cycle, are a "tell". I'll continue.....

roachboy

it's interesting, host, which is why i took the time to respond as i did--and i'm working this stuff out in real time as well.

it's often when i am working in this way that i get the most concerned about steps i take and their logic----because they're the only thing i can use to feel my way along and stay coherent.

i'll post something more tomorrow.

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

flstf

host, comments on your post #39

It is hard to believe that lenders would rather take a large loss and forclose instead of taking a smaller loss and freezing rates, but I have not read a better explannation than yours.
If I understand the situation correctly then those of us who hold these mutual funds in our 401Ks and IRAs will be the biggest losers in this mortgage mess. Also those who are upside down in their mortgages and are forced to sell at a loss.The biggest winners should be the prospective house buyers who have already sold and can wait for prices to bottom out.
I really do not understand how our currency works and why we accept this fiat money in exchange for things of value especially since its value is based on the actions of whichever polititians happen to be in office. But that being said, if the fix does not work and the attempt to save fiat paper fails wouldn't it be better to hold something of value like a house instead of a bunch of this paper?
I agree that prices are going to fall further but also think that those able to ride this downturn out will eventually make out OK unless prices never recover. Just like many of us do not sell our portfolios everytime the market takes a dive.

I don't know what to make of your comparison of house prices from the 1930s and today. Like Ustwo said houses are much larger today. I grew up in the 50s and we had a 1/2 acre typical suburban house, 3 bedrooms one bathroom, with mom, dad, 4 kids and a grandma. Today my wife and I live alone in a 3200 sq. ft. house with 4 bathrooms. Back then we had one car and today most families have 2 or 3. I'm not disputing your analogy just pointing out that things are much different now.

GonadWarrior

The people who will be hurt are the taxpayers and businesses in the US, whose taxes will rise to bail out the spendthrifts. This, of course, will make us less competitive in the world markets, and weaken the dollar.

Just like all of the people who receive government assistance when their houses burn down, or they get flooded out, etc. Why should those who pay insurance bail out those who choose not to?

Charlatan

Gonad... I am not sure that you get the point here. Perhaps you'd like to expand on your post, taking into consideration all that has been discussed above.

__________________
"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke

GonadWarrior

Well, in a nutshell...

Host, between insults directed at UsTwo, reported that houses cost too much. He then mentioned some type of dark forces that initiate inflation, prop up housing prices, cause $100/barrel oil, etc. I assumed he was referring to the Bush administration, because in his view, EVERYTHING is the fault of the Bush administration.

My post was intended to point out that a lack of personal responsibility on the part of many US citizens does more to damage our economy than the factors Host cited, although I have yet to glean a coherent point from those citations.

Elphaba

Ahh, personal responsibility! I am so for it in all aspects of life.

Expand upon your "nutshell" please, because I have yet to glean your coherent point.

__________________
"You can't ignore politics, no matter how much you'd like to." Molly Ivins - 1944-2007