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Old 11-03-2018, 06:22 PM
 
Location: Indianapolis, East Side
751 posts, read 369,091 times
Reputation: 1724

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Quote:
Originally Posted by C2BP View Post
No real economic growth and no meaningfull wage growth, only debt growth instead. Corporations had never been so rich. Workers had never been so poor, and so indebted.

Where do we think this leads?

I'd have to be blind not to see the pitchforks coming. Workers forced out of their homes, forced to live in the streets - because we refused to let deflation do it's job in lowering prices and making life manageable for the working poor. Bernanke's plan was the preserve the inequality of wealth by preserving the debt bubble - to hell with everything else. Let prices rise; and let workers pay for these rising prices, not with more wages, which would trigger inflation, but with more debt, which essentially made debt-slaves of the working poor.
Deflation would not only lower prices, it would lower wages, too. It would make people less able to pay off their debts. It would make the debt-free rich even richer.

As for poor workers, you must not be familiar with the Great Depression. At its worst in the US, 25% of all workers and 37% of all nonfarm workers were completely out of work. Farmers couldn't afford to harvest their crops; people starved. Many lived in tent cities ("Hoovervilles") or hopped trains looking for work. Thousands of banks failed--and there was no deposit insurance.

Today? Wages have risen 2.9% in 2018. Unemployment is at a 49-year low. Black and Hispanic unemployment are at record lows. We have federal deposit insurance, meaning you won't lose your savings (within $250,000) if your bank fails. We have a social safety net; starvation is all but non-existent. There is reasonably priced housing in the US. Corporate profits have made some fat cats rich--but some of those corporations have raised wages, increased benefits, and bought back stock. Stock buybacks are good for people with IRAs or 401(k)s invested in stock mutual funds. A lot of those people are regular Janes and Joe Six-Packs. Life's pretty good.
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Old 11-03-2018, 06:23 PM
 
25,971 posts, read 50,014,106 times
Reputation: 19484
There is no free lunch... Real Estate was propped up and the economy through QE

Can't put off paying the piper forever.

Inflation is alive and well... look at Real Estate, materials, food, etc...

I have seen some real wage growth in the trades here in the SF Bay Area... carpenters, plumbers, electricians, boiler makers have all the work they can handle and then some...

The Boiler Makers are getting double time every weekend... he makes his house payment in 3 days over the weekend...

Also... fast food here is hurting... paying $15 an hour and those with experience are leaving for more...

It is never all or nothing...

I know I was fortunate to have Grandparents that made the Depression real to me as a small child... my Grandmother was the most debt adverse person I have ever met... unless she had cash in hand she was not buying... I never saw her so upset as when I showed her my new Credit Card... she did not approve and let everyone know... my poor parents got an earful... I had to promise to never carry a balance otherwise she would not let it go.

They saved for years to put down a big down payment for their house and then did a 10 year note... her only buying on time in her life.
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Old 11-03-2018, 07:45 PM
 
27,086 posts, read 38,350,660 times
Reputation: 35098
Quote:
Originally Posted by Ultrarunner View Post
There is no free lunch... Real Estate was propped up and the economy through QE

Can't put off paying the piper forever.

Inflation is alive and well... look at Real Estate, materials, food, etc...

I have seen some real wage growth in the trades here in the SF Bay Area... carpenters, plumbers, electricians, boiler makers have all the work they can handle and then some...

The Boiler Makers are getting double time every weekend... he makes his house payment in 3 days over the weekend...

Also... fast food here is hurting... paying $15 an hour and those with experience are leaving for more...

It is never all or nothing...

I know I was fortunate to have Grandparents that made the Depression real to me as a small child... my Grandmother was the most debt adverse person I have ever met... unless she had cash in hand she was not buying... I never saw her so upset as when I showed her my new Credit Card... she did not approve and let everyone know... my poor parents got an earful... I had to promise to never carry a balance otherwise she would not let it go.

They saved for years to put down a big down payment for their house and then did a 10 year note... her only buying on time in her life.
My parents went through the Great Depression with three small boys, and had a girl part way through. They were the same way. Never threw things away if at all possible. Paid cash. Didn't really trust banks.

I finally got one of my older brothers to talk to me about what it was like (20 years older than me) and what he told me scared the crap out of me.

The "Great Depression" of the early 2000's was a cake walk compared to the one in the '30s. If we have another one like that one this country is in deep trouble. I can guarantee you those in power now won't do anything to help, or so little as to have the same effect - none.
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Old 11-03-2018, 09:32 PM
 
773 posts, read 418,035 times
Reputation: 1125
Quote:
Originally Posted by Ultrarunner View Post
There is no free lunch... Real Estate was propped up and the economy through QE

Can't put off paying the piper forever.

Inflation is alive and well... look at Real Estate, materials, food, etc...

I have seen some real wage growth in the trades here in the SF Bay Area... carpenters, plumbers, electricians, boiler makers have all the work they can handle and then some...

The Boiler Makers are getting double time every weekend... he makes his house payment in 3 days over the weekend...

Also... fast food here is hurting... paying $15 an hour and those with experience are leaving for more...

It is never all or nothing...

I know I was fortunate to have Grandparents that made the Depression real to me as a small child... my Grandmother was the most debt adverse person I have ever met... unless she had cash in hand she was not buying... I never saw her so upset as when I showed her my new Credit Card... she did not approve and let everyone know... my poor parents got an earful... I had to promise to never carry a balance otherwise she would not let it go.

They saved for years to put down a big down payment for their house and then did a 10 year note... her only buying on time in her life.
Thank you for being reasonable and realistic in your post. DEFLATION saves us from debt, and from civil war. The Middle Class is the buffer between classes and Class Warfare. The Middle Class is the referee between the Rich and the Poor, who hate each other politically. The Middle Class is LIFE.

If the rich keep being selfish, as has been the case since 2001, then the only result will be class warfare, the advent of the pitchfork. And the banks will be the target of this seemingly inevitable rebellion. Opening the public coffers to "reward" corporations for taking on a large debt is really not the way to manage things unless one wants a form of corporate feudalism, where the mass works for the good of the corporations.

Which imbalance is better, one in which the many are enslaved for the good of the few, or one in which the few (the corporations) are enslaved for the good of the many??????????????
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Old 11-04-2018, 12:27 AM
 
25,971 posts, read 50,014,106 times
Reputation: 19484
Quote:
Originally Posted by Tek_Freek View Post
My parents went through the Great Depression with three small boys, and had a girl part way through. They were the same way. Never threw things away if at all possible. Paid cash. Didn't really trust banks.

I finally got one of my older brothers to talk to me about what it was like (20 years older than me) and what he told me scared the crap out of me.

The "Great Depression" of the early 2000's was a cake walk compared to the one in the '30s. If we have another one like that one this country is in deep trouble. I can guarantee you those in power now won't do anything to help, or so little as to have the same effect - none.
The easy or soft landing the last go around was quite revealing...

A family member through marriage had recently married... he worked for a small family business with 16 employees... he was and his co-worker were the number 15 and 16 to get laid off... prior to that he was working a lot of overtime a few years back...

So... being a relative newlywed and without a job... he had a lot of time on his hands... I believe unemployment paid $1800 a month... he had time to work on his music and less than a year from being laid off they had a child... so he got to be Mister Mom for 16 months... all the while the unemployment was being extended...

He was actually very happy collecting unemployment and having the time to take care of his baby daughter and did not want to go back to work... his wife laid down the law... she had a few furlough periods but steady work for the county with family medical...

So after a nice long break... his former employer calls and asks him back... business is picking up... he said he still had about a month of unemployment and agreed to go back when it was over...

I know others in similar situations as a property manager...

My point in the long post is this go around was NOTHING like the 1930's... it was a blip for many and for some a welcome respite...

For employers it was power... people towed the line and going years without a raise was seldom questioned... now it is the opposite... employers are being forced to pay more or continue to lose staff... plus those older are now more comfortable retiring as their nest egg has done nicely... many retirements were put off when the market/economy tanked last time...

Many I know could have weathered the Real Estate downturn but chose to walk... it was called strategic default and no different than bailing from a bad investment...
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Old 11-04-2018, 06:47 AM
 
11,607 posts, read 6,000,206 times
Reputation: 21447
Affluent places use zoning to protect their school systems. By making housing scarce, it becomes expensive and the unwashed masses who would trash your school system can’t afford to live there. If you can’t afford it, you live in the failed city with the lousy school system.

Watch the reaction of any leafy professional bedroom town to low income or affordable housing. They fight it to the death. Socioeconomic segregation.

You can have socioeconomically mixed places but you need competitive exam schools to keep the affluent people from fleeing. New York City is an example. The middle class didn’t flee because their children attended schools with entrance exams. The riff raff can’t get admitted.
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Old 11-04-2018, 07:13 AM
 
Location: Indianapolis, East Side
751 posts, read 369,091 times
Reputation: 1724
Quote:
Originally Posted by C2BP View Post
Thank you for being reasonable and realistic in your post. DEFLATION saves us from debt, and from civil war. The Middle Class is the buffer between classes and Class Warfare. The Middle Class is the referee between the Rich and the Poor, who hate each other politically. The Middle Class is LIFE.

If the rich keep being selfish, as has been the case since 2001, then the only result will be class warfare, the advent of the pitchfork. And the banks will be the target of this seemingly inevitable rebellion. Opening the public coffers to "reward" corporations for taking on a large debt is really not the way to manage things unless one wants a form of corporate feudalism, where the mass works for the good of the corporations.
Let's take deflation first. Through either a decrease in the money supply or increase in goods, prices go down. So far, so good. But if the price of everything goes down (and goods available don't increase), what do companies pay their employees with? With less revenue, there's less money to pay their employees. With employees making less money, they're less able to pay their debts. But anyone with lots of cash and no debt will be better off, since everything is cheaper.

IRL, price controls lead to shortages.

Where governments have taken on too much debt and serviced it by printing too much money, leading to runaway inflation, yes, they do need deflation. But "runaway inflation" here doesn't mean double-digit inflation, it doesn't mean it's a little harder to buy gas and groceries, it means the currency is virtually worthless. It means people use the currency as kindling. See the Weimar Republic, the Confederacy, and Venezuela.

People didn't become selfish in 2001. People--rich, poor and middle class--have always been selfish. I agree that laws should be changed to couple reward with risk, but the answer isn't warfare. Politicians make the laws and agree to the bailouts. If you want change, put down the pitchfork and write to your congressman--or vote them out on Tuesday.
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Old 11-04-2018, 09:08 AM
pdw pdw started this thread
 
Location: Ontario, Canada
1,470 posts, read 1,879,264 times
Reputation: 854
Theres five guys in the world who could be packed into a sedan who own more wealth than the poorest 3 and a half billion. But go ahead, do tell how capitalism's real beneficiaries are the working poor.
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Old 11-04-2018, 09:49 AM
 
Location: Paranoid State
12,878 posts, read 9,585,636 times
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I'll apologize in advance: my post is too long. Sometimes a subject is too complex to condense into a short answer.

Quote:
Originally Posted by pdw View Post
After most of the last century having an achievable middle class dream, today we are reaching, at least in areas with viable job markets, a point where in order to buy property you must already have property. The cheapest houses in your entire metropolitan area are selling for around half a million and all your average worker has left in his pocket is the $150 for groceries after paying for his car insurance you need to get to work, his rented 65sqft room. God forbid you have a baby on the way and are looking to move into somewhere bigger, even a 1 bedroom apartment starts at around $1300-1400 a month in the cheapest areas. You better have a perfect credit rating, references from your last 2 landlords and your boss and make more money than everyone else applying for the same place. Better yet better bid $300 a month higher so $1700 a month just to make sure you can get a roof over your head at the end of the month. This is the reality of modern middle class life in the Western world.
While there are inaccuracies in your original post, I won't dwell on them.

Your general statement of the problem is that housing costs too darn much - and most people agree with that. At the same time, a fundamental tenet of modern economics is that "Nothing is either good nor bad save the alternatives make it look that way." It is all about the alternatives. Sometimes this is referred to as the law of unintended consequences: you do something to achieve a result, only to find unanticipated new problems arise as a result


Quote:
Originally Posted by pdw View Post
Meanwhile, anyone who's lucky enough to own a house has enough equity to buy another one and another one and banks will approve any loans they ask for. ... The equity increases alone will make them richer and richer...
Your observations are essentially the same as those of disgraced former Assistant Secretary of HUD for Fair Housing and Equal Opportunity Roberta Achtenberg during the first Clinton Administration.

Achtenberg and her boss HUD Secretary Henry Cisneros believed in the trend you cite. They went a bit farther in their analysis. They observed that for the bulk of the 20th century, Dad had a job, and his compensation put food on the table, clothes on the backs of the family, and most importantly, a roof over their head.

By the latter part of the 1980s, the model seemed to have been flipped on its head. A house became the major source of a family's wealth, and Dad's job (and Mom's too) was a source to pay the mortgage -- and the magic of leverage-based housing price appreciation did its job. After all, housing prices only go up, right?

The Federal Government's fear was congruent with yours. There fear was that those who did not own residential real estate would be left at the station while owners were on the train leading to permanent wealth.

Moreover, the Federal Government observed that those left at the station were disproportionately poor (duh) and were people-of-color (which is why the disgraced Achtenberg's section of Fair Housing and Equal Opportunity got involved.) The Federal Government saw this as a "wrong" that needed to be "righted" via federal intervention.

How did our government respond?

Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities, giving a leg-up to the poor and more specifically poor people-of-color. The original quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.

It is certainly possible to find prime borrowers among people with incomes below the median. But when more than half of the mortgages Fannie and Freddie were required to buy were required to have that characteristic, these two government-sponsored enterprises had to significantly reduce their underwriting standards.

Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.

27 million loansóhalf of all mortgages in the U.S.ówere subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.

Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution. Thus it is clear where the demand for these deficient mortgages came from.

The huge government investment in subprime mortgages achieved its purpose. Home ownership in the U.S. increased to 69% from 65% (where it had been for 30 years). But it also led to the biggest housing bubble in American history. This bubble, which lasted from 1997 to 2007, also created a huge private market for mortgage-backed securities (MBS) based on pools of subprime loans.

As housing bubbles grow, rising prices suppress delinquencies and defaults. People who could not meet their mortgage obligations could refinance or sell, because their houses were now worth more.

Accordingly, by the mid-2000s, investors had begun to notice that securities based on subprime mortgages were producing the high yields, but not showing the large number of defaults, that are usually associated with subprime loans. This triggered strong investor demand for these securities, causing the growth of the first significant private market for MBS based on subprime and other risky mortgages.

By 2008 this market consisted of about 7.8 million subprime loans, nearly one-third of the 27 million that were then outstanding.

Then the government-caused bubble popped. And the rest, as they say, is history. You may be too young to remember the Great Recession, but I trust you can read the many stories of real pain & suffering documented in numerous sources.

QUOTE=pdw;53521006]In the next 20 or 30 years a ruling class of landowners will bring us back to a world eerily like the first one unless some drastic changes are made...This current economic system can't sustain itself for the middle class, something's gotta give.[/quote]

At the state & federal level, landowners are not a particularly strong political force. Instead of a "ruling class of landowners," we have a "ruling class of public sector unions" who call the shots. It is only at the local level where landowners have significant power.

Your conclusion that the middle class will decline is controverted by actual data. The middle class is now thriving.

At the same time, housing is expensive. Studies have shown governmental requirements are a huge driver of the cost of new housing. Local governments routinely deny any building permit for new developments until the developer "voluntarily" agrees to spend money for the city's benefit that is not related to housing. The local government requires bribes in the form of new parks, walking trails, bike paths, new park equipment, even the construction of public swimming pools and rec facilities -- just so the local developer can be approved to build a new sub development of, say, 100 houses. Clearly, the costs imposed by the local government drive up the price of housing.

In Los Angeles, for example, it has been estimated that over $200,000 of costs per house are the direct result of local government-mandated bribes, er, "community development projects."
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Old 11-04-2018, 10:04 AM
 
Location: Indianapolis, East Side
751 posts, read 369,091 times
Reputation: 1724
Quote:
Originally Posted by pdw View Post
Theres five guys in the world who could be packed into a sedan who own more wealth than the poorest 3 and a half billion. But go ahead, do tell how capitalism's real beneficiaries are the working poor.
Four of those five guys are American, and the world's poorest people are mostly from Africa and the Middle East. But--anybody--do tell why those of us in capitalist countries should make a move towards civil wars and subsistence agriculture.

Rhetoric aside, I'm sure you're not suggesting that being poor in the US or Canada is remotely like being poor in a non-capitalist country, are you? Or that the five richest people made 3.5 billion people poor--when they've been poor for ages?
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