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and when you are wrong ? i have been hearing the same song and dance since 1975 . we are always headed for a great depression or hyper inflation .
Pretty good song and dance. Since 1975 we have had two great depressions and a decade of hyperinflation. We have had asset hyperinflation since QE1. Foreign creditors are dumping dollars by buying US assets. Have you tried buying farm land, timber land or a home lately?
The catch-22 is our trade imbalance, much of which is due to the overvalued dollar. Any time we raise interest rates, the dollar skyrockets. Even printing a trillion dollars of funny money didn't bring it down. As long as productive countries continue to sell us trinkets in exchange for our assets, the process will continue.
Pretty good song and dance. Since 1975 we have had two great depressions and a decade of hyperinflation. We have had asset hyperinflation since QE1. Foreign creditors are dumping dollars by buying US assets. Have you tried buying farm land, timber land or a home lately?
The catch-22 is our trade imbalance, much of which is due to the overvalued dollar. Any time we raise interest rates, the dollar skyrockets. Even printing a trillion dollars of funny money didn't bring it down. As long as productive countries continue to sell us trinkets in exchange for our assets, the process will continue.
and through it all we are still here , financially assets are higher than ever and the world did not end as we know it .
as usual it all comes to pass and we go on . if you tried to hide from it all , you are a lot poorer for it .
capital always has become rational despite human behavior being irrational and trying to alter its path wrongly from time to time . . .capitals path has always been over time to bigger and better company's and greater gdp eventually .
We know what the Fed thinks... they tell us what they think and why they set rates the way they have. They only try to be cagey about future rate movements to keep the markets from freaking out.
The Fed wanted congress to put people to work. We should have had a New Deal that put people to freaking work building stuff. Congress passed a stimulus that was in 3 parts - a) finished up a few projects in 2009 that were already in motion, b) aid to states so they could pay their bills and not go bankrupt and c) tax cuts, the favorite American solution to problems. Then they spent their political capital passing Obamacare without a public option. Then the congress went Republican and has been great at doing absolutely nothing for the last 6 years.
In that absence, the Fed said it would provide what stimulus it could. The fed cannot provide jobs. They can make money cheaper in the hope that the private sector provides jobs. That has seen some success. Not great, but better than nothing. They have said straight up that they will not increase rates significantly until the labor market looks strong. They are only just indicating that the labor market might finally be looking better, after nearly 9 years since the housing crisis began.
I do not expect interest rates to get back to "normal" levels of 3 to 5% until 2025 more or less. It will certainly not be this decade. The "great recession" was THAT bad.
The recession that started in 2007, despite Mathjak's nonchalance, was a once-in-a-century economic cataclysm. Without a response it would have been a Great Depression. With the piddling response from congress, they at least forestalled the Depression part, but they did not invest in the recovery part. We lost 8 million jobs. 8 MILLION jobs.
The reason housing is up is because housing starts fell to levels not seen since before WWII. 70 year lows in housing starts, people. Locally in my town of 80,000, there were hundreds or sometimes low thousands of permits pulled for new houses every year. In 2009 how many do you think there were? 12. Not 200, not 1200, twelve new houses built in an entire year. Yet the population still grew well beyond 12 families. Also imagine what happened to a construction & real estate sector used to producing hundreds of new houses per year, only producing 12.
Right now, in 2016, we are at 30 year lows of housing starts. We are at 1990 levels of housing construction. In 1990, we had 249 million Americans. Today we have about 315 million. With a growing population and practically NO new housing being created from about 2009-11, then historically low levels thereafter, what did anyone expect to happen to housing values & rents once the foreclosures were wrung out of they system?
Pretty good song and dance. Since 1975 we have had two great depressions and a decade of hyperinflation. We have had asset hyperinflation since QE1. Foreign creditors are dumping dollars by buying US assets. Have you tried buying farm land, timber land or a home lately?
The catch-22 is our trade imbalance, much of which is due to the overvalued dollar. Any time we raise interest rates, the dollar skyrockets. Even printing a trillion dollars of funny money didn't bring it down. As long as productive countries continue to sell us trinkets in exchange for our assets, the process will continue.
That's largely decoupled from the interest rates of the last 7 or 8 years.
Interest rates are the primary knob used by the Fed to control the inflation rate. If we had signs of consumer price inflation, the Fed would start bumping up interest rates.
Real estate prices are entirely local. Compare, say, San Francisco with Detroit. If you're in a place with a vibrant local economy or a place where real estate is in some way scarce, prices are soaring.
I'd be totally happy with going back to historical averages for interest rates. I have no debt. I have plenty of cash and investable assets where it would be nice to get a nice safe positive (after inflation) return on my cash in safe interest-bearing investments instead of having to risk it in the stock market to get anything.
...The Fed wanted congress to put people to work. We should have had a New Deal that put people to freaking work building stuff. ...
Right now, in 2016, we are at 30 year lows of housing starts. We are at 1990 levels of housing construction. In 1990, we had 249 million Americans. Today we have about 315 million. With a growing population and practically NO new housing being created from about 2009-11, then historically low levels thereafter, what did anyone expect to happen to housing values & rents once the foreclosures were wrung out of they system?
Good points. Given the collapse of housing-construction in 2007, and the continuation of population-growth, we ought to be seeing an effulgence of pent-up demand for housing, akin to post-WW2… especially since interest-rates are so low. But we're not seeing it. Hundreds of thousands of new houses should be going up every year, built by millions of new construction workers. But we're not seeing it. Raising interest rates, in light of that, would be abysmally stupid.
I agree with the assessment, that the overarching problem is a flagrantly do-nothing Congress. Only the Legislative branch can, well, legislate a fiscal stimulus. We needed a $9T stimulus – not a $900B one.
It's true that asset prices have recovered, more or less. But they've not exactly burgeoned. The 21st century history of the American stock market is violent gyrations and lackluster cumulative growth. The 21st century history of most foreign stock markets is even worse. Capital isn't dead. But capital in the 21st century has simply been unable to yield the sort of remuneration that powered the 1980s and 1990s.
The question, it seems to me, is whether the 1980s and 1990s were an imitable Golden Age, that can't be recovered or sustained. If so, then our basic assumptions about pensions and investment, retirement and growth, are going to have to be revised downward.
If they raise rates full blown deflation and depression will follow, the tsunami comes more quickly. It may bring down the entire system with it. So what? We created this mess and this zombie economy, we lied and cheated, we deluded ourselves that we can avoid pain, that all those monetary tricks and artificial low interest rates can work. We are 16 years late raising interest rates.
Our only medicine is higher interest rates and massive defaults and bankruptcies. That is the only way out of this mess that we have created for ourselves. Only way that can bring normal and organic economic growth one day, nothing else will work and can't work.
I know, most of you live in denial and can't accept this fact. What is next, should we try QE4 after QE1, QE2, Q3 didn't work. Should we try NIRP after ZIRP didn't work? How long our insanity will last.......until we self destroy ourselves and our country?
No easy and painless way out of our mess. The Fed has been staling since 2001, staling and lying for 16 years, stealing our public money, taxpayer money and plundering our country leaving us with massive debts. How long are we going to live in denial??????????
A lot of pain may mean revolution and civil war in America. It does not just mean a high unemployment rate. We are going to pay a huge price, all of us will, for this debt orgy and insanity since 2001.
Good points. Given the collapse of housing-construction in 2007, and the continuation of population-growth, we ought to be seeing an effulgence of pent-up demand for housing, akin to post-WW2… especially since interest-rates are so low. But we're not seeing it. Hundreds of thousands of new houses should be going up every year, built by millions of new construction workers. But we're not seeing it. Raising interest rates, in light of that, would be abysmally stupid.
Risk is under-valued in good times and over-valued in bad times. Housing starts were quickly depressed by an over-reactive reversion to hyper-stringent mortgage lending terms and have been depressed since by such things as meager wage growth for other than hedge-fund managers, forced mid-life down-sizing due to jobs lost being replaced by lower-paying ones, and of course the ever increasing toll taken by student debt in financially crippling what ought to be a key population of first-time home buyers. At roughly 63%, current US home-ownership rates are down by about 6 points from their 2007 peaks. There is simply no way in which housing starts could be just bubbling right along under such conditions.
Quote:
Originally Posted by ohio_peasant
I agree with the assessment, that the overarching problem is a flagrantly do-nothing Congress. Only the Legislative branch can, well, legislate a fiscal stimulus. We needed a $9T stimulus – not a $900B one.
You can't have what you can't pass. Let's remember that Republicans had originally proposed a stimulus package of less than $500 billion in tax cuts for the rich and mega-corporations, and they then forced cuts of nearly $100 billion in actual stimulus spending out of the bill that finally passed. This was their price for the three Senate votes that were needed to pass it.
Quote:
Originally Posted by ohio_peasant
The question, it seems to me, is whether the 1980s and 1990s were an imitable Golden Age, that can't be recovered or sustained.
Hindsight often fogs the mind. The 1990's were a slow and difficult recovery from the painful bust-boom-bust eras of Reagan and Bush-41. The 20th century still did finish on a high note, although The Decider quickly put an end to that. The task today is find ways of again repairing the cumulative economic damage done while an unfortunate segment of the population simply opposes making any such repairs at all.
Quote:
Originally Posted by ohio_peasant
If so, then our basic assumptions about pensions and investment, retirement and growth, are going to have to be revised downward.
Common sense has always told us that important goods and services that the private sector either cannot or will not provide should be provided instead by the public sector. Not much has changed in that.
Risk is under-valued in good times and over-valued in bad times. Housing starts were quickly depressed by an over-reactive reversion to hyper-stringent mortgage lending terms and have been depressed since by such things as meager wage growth for other than hedge-fund managers, forced mid-life down-sizing due to jobs lost being replaced by lower-paying ones, and of course the ever increasing toll taken by student debt in financially crippling what ought to be a key population of first-time home buyers. At roughly 63%, current US home-ownership rates are down by about 6 points from their 2007 peaks. There is simply no way in which housing starts could be just bubbling right along under such conditions.
You can't have what you can't pass. Let's remember that Republicans had originally proposed a stimulus package of less than $500 billion in tax cuts for the rich and mega-corporations, and they then forced cuts of nearly $100 billion in actual stimulus spending out of the bill that finally passed. This was their price for the three Senate votes that were needed to pass it.
Hindsight often fogs the mind. The 1990's were a slow and difficult recovery from the painful bust-boom-bust eras of Reagan and Bush-41. The 20th century still did finish on a high note, although The Decider quickly put an end to that. The task today is find ways of again repairing the cumulative economic damage done while an unfortunate segment of the population simply opposes making any such repairs at all.
Common sense has always told us that important goods and services that the private sector either cannot or will not provide should be provided instead by the public sector. Not much has changed in that.
Seems to me the solutions are fairly simple. I think our economy is fundamentally strong. At the very least, it's better than pretty much any other major country's economy.
1) Get a lot of housing built to increase supply bring prices down to an acceptable range. Not only single family homes but nice multi-family units. Do this without the out of control speculation that caused the 2007-08 crisis.
2) Fix the freaking college cost problem. Either figure out a way to increase supply & reduce the cost or decrease the demand by giving young people an alternate path to jobs.
3) Fix the health care cost problem.
Our economy has the ability to be quite good and we still have a lot of built-in advantages vs. our competitors, but we cannot figure those 3 problems out which all have a kind of leukemic affect on our economic health.
The above assumes the holder is an all-cash buyer of bonds. It gets much worse if the holder is using margin which can range from 3 to 7 percent.
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