High Gas, Low Home Prices, All Good

There are lots of reasons why I could not be elected to office beyond my less than photogenic looks. I advocate higher gasoline prices for reasons I have often explained & I am also generally pleased with the decline of housing prices, for reasons I will explain below. These positions are not vote getters.

I was stimulated to write this post by an article in the Washington Post that speculated that the housing bust might be good to help limit urban sprawl, but that guy did a good job of explaining, so I will just let you read the link.

My simple observation is that housing had just become too expensive and prices should fall. Our American experience is part of a global housing price boom that was driving the price of a home beyond the means of average people. There is not a single market in homes in America, but most regions saw unsustainable growth in prices over the last ten years. In my own area, the boom started in December of 1997 and a home bought at that time had nearly tripled in value by the peak of last year. This gain was way more than inflation. If you paid $150,000.00 for your home in 1997, it should be worth only $196,427.10 adjusting for inflation alone. Just keeping up with inflation, BTW, would have given you a good investment, since in addition to that gain you would have had the opportunity to live in the house and not pay rent for ten years. Try selling your ten year old car for as much as you paid for it.

I am not hoping that housing will fall to its pre-boom levels. Real estate is a cyclical market. In our area, housing had fallen in real terms from 1987-1997, so the price when the rise in value started was a bottom price. However, it does not take a rocket scientist to calculate that double digit gains in value beyond the inflation rate is neither sustainable nor desirable.

A home is usually the biggest investment a family owns. Home ownership has a stabilizing effect on society and it has been the best way for ordinary folks to secure their future. But perhaps we are using the term investment too broadly. You should not be buying a home primarily as an investment you plan to sell to make money, as you would a share of stock. Housing loses it stabilizing effect if/when houses become too much like speculative investments. This is what happened to housing during the recent boom. A lot of the people defaulting today were speculating. Some were buying more house than their incomes could reasonably support; others were looking to flip their properties for profit (there are several “how-to” TV programs about this) and some were investing in multiple properties.

Investors accept risk. People treating homes as money making investments helped push the prices up beyond what the market would bear. I have no trouble with investors losing money. Lord knows I have lost many times. It is a good thing, keeps you on your better behavior. The collateral damage is people looking for a place to live. That is the reason I prefer to keep the money making investment aspect of a house to a minimum.

The price drop will burn some investors and chastise them for another ten years. You can see in the pattern of home sales that is about how long the lesson sticks before a new generation starts again.

Lower prices allow more people to buy into the American dream. I remember well 1988, when I thought of buying my first house. I could not afford a decent one. Fortunately for me, I left the country for nine years and when I came back housing prices had dropped in real terms and relative to my income so I could buy. Had they continued at their 1988 pace and/or if foolish investors had been bailed out and allowed to continue their foolishness, buying a home would not have been possible. I would have ended up renting from one of those speculators.

In my ideal scenario, housing prices would not drop much farther, BUT they would not rise for five or six years. This would mean an after inflation drop in prices and would allow wages of the average person to catch up. If you bought your house as a home, you would be largely unaffected by this correction.

In the long run, housing does not increase much faster than inflation. We are deceived by booms, like we have just experienced and housing prices in particular areas. Yes, prices in Manhattan have gone way up, but today I could buy the house where I grew up in Milwaukee for about what my father paid for it in 1946, adjusted for inflation. Buying a house is a good “investment” (and now I am using the term more broadly) because it allows the owner to avoid paying rent and is a form of forced savings. If people look at housing like that – a place to live – most have no trouble. Year-to-year changes in prices make little practical difference if you will live there a long time. If you were looking for the jackpot, you just got chastised. Take the lesson to heart, don’t do it again and speak of it no more.

Posted by Jack at December 30, 2007 1:10 PM
Comments
Comment #241790

Jack,

All this is well and good for those that might be looking for a house, that said I purchased a house in Prescott nearly a year ago, a house, by the way I intend to live in for quite a while. I bought the house for well below market value and have seen the real value of the house drop well below what I paid for it.
Also the house I have been trying to sell for the last year has lost significant value as well. It was just my bad luck to get hosed at the beginning of the downturn, and while others are getting bailed out, I am just going to have to take my lumps and hope times get better.
This isn’t just about investors gambling. Some folks, like myself, got caught in the middle.

Posted by: Rocky at December 30, 2007 5:55 PM
Comment #241792

At my credit union we have voluntarily gone back, reviewed the credit files of our members that have mortgages with us, include 2nd mortgages, and reduced the rates, moved to 40 year mortgages, at our cost. While this is only a couple hundred loans, we believe that we exist for thrist and for financial success. We are also selfish and believe that these individual members will be more loyal to us regarding their future borrowing and investment decisions.

We also continue to exprerience zero in terms of default despite over 1,000 mortgages. Of course we don’t have any truly sub-prime mortgages.

However, I think it is fair to agree with Jack here that owning a home is still the single biggest financial goal out there. And in my 25 years in banking, is still the thing we pay first.

Posted by: Edge at December 30, 2007 6:15 PM
Comment #241793

I’m with ya Jack. Lower home prices will make home ownership more affordable to the working class. But it’s sure playing hell with the investors that caused most the price inflation in the first place.
Some of the real estate price growth in this area over the last few years has come from folks moving here to get out of Valdosta where housing has gone through the roof. But even at that is should never have got as high as it has over the last couple of years. Three bedroom 1 1/2 bath houses that sold for $39,000 (yeah, that’s right) in 04 went to $74,000 over the last 2 years. And real estate investors have caused most of this. Right now I can get the same house for about $64,000. Still to high. Maybe $43,000 would be more in line with demand.
I think that another reason for the over inflated pricing is because the loan companies were lending money to anyone with a job regardless of their inability to make the payments.

Posted by: Ron Brown at December 30, 2007 6:22 PM
Comment #241795

I’m wondering how much the boom in housing costs was actually caused by government?

I know in my small city alone there were dozens of street-long areas bull-dozed and replaced with brand new single family housing that must have cost in the area of $100,000 or more to purchase. These $100,000 houses were built for the poor who signed up for the government-assisted programs.

It is only common sense that every city block of brand new housing provided by the government is going to jack up the prices of the surrounding houses in the otherwise reasonably priced areas.

I’m thinking that the extremely aggressive campaign of the Bush Administration to build new housing for the poor and other habitually questionable “lendees” may have contributed to the problems in the housing market.

I think the same rule applies here that applies in nearly any facet of the economy. When the government gets involved in widescale efforts to provide services that are better handled by the free markets, the price goes up dramatically.
There are some areas in my city where housing is somewhat reasonable, and I do not know why the poor and questionable purchasers are being placed in brand new housing, rather than purchasing housing that already exists at more reasonable prices. I’m not sure if this may be playing into the problems in the housing market, but it just doesn’t seem to make a lot of sense to me.

JD

Posted by: JD at December 30, 2007 7:48 PM
Comment #241805

Low house prices are NOT a good thing if you’re selling your house…people are losing their investment in their homes and consequently their net worth is falling…in some places, quite precipitously…

Yup…it’s a wonderful economy…

Posted by: Rachel at December 30, 2007 10:02 PM
Comment #241806

Rocky

I understand your feelings, but when you think about it, you are an example of why the housing bust doesn’t matter that much to a long term home owners. How does the drop in the value of your new home really change anything for you? Trying to sell your old place is a bit more of a problem.

I know it seems different, but your situation is really no different than that of a person who bought a house a long time ago and is sitting on a big gain. If both of your houses were worth $300,000 last year and are worth $250,000 today, you both have a paper loss of $50,000. It matters only if you plan to sell this year.

Rachel

It is bad for sellers and good for buyers. Some people have lost money on their homes. I am a home owner and I am sure I lost tens of thousands of dollars, but since I continue to own my home, it doesn’t matter. That is the case for most home owners. The only people who really lost money are those who bought within the last in the last two years AND are selling now.

In the aggregate, home buyers are poorer than home sellers. Look at this as helping the poor. Where you happy when prices tripled, BTW?

It is useful to remember the nature of an investment. You plan to make money but sometimes you lose it. It is regrettable, but not a tragedy.

Home prices were too high. Lower prices will help ordinary people afford to buy homes. Anybody who bought a house as a place to live (i.e. a home) is not affected by the price drop unless he plans to sell. Some people who bought in the last two years will suffer if they sell today. On the other hand, they will be able to buy a new home for less, so if they are merely moving, they will be okay. If they bought the home as an investment to make money, they lost it. That kind of investment is risky. If they didn’t know that before, they learned the lesson now. There is always a shake out at the end of a boom. That is how it should be.

Posted by: Jack at December 30, 2007 11:37 PM
Comment #241810

Rachel:

Yup…it’s a wonderful economy…

It’s a pretty normal economy. We are growing at historical norms. The deficit is below 40 year averages. Housing has been strong the last several years and is in a predictable retraction.
The risk of recession is predictably rising as the recovery ages.

There are problems. There are always problems.

Posted by: Craig Holmes at December 31, 2007 12:02 AM
Comment #241818

The only people who really lost money are those who bought within the last in the last two years AND are selling now.

And the people who are losing their houses in foreclosure, the businesses that supported these mortgages, and the individuals who invested in them. It’s hurt the American economy in general and sapped international confidence in our ability to pay back our debts. This was an outrageous thing that happened - businesses using predatory lending practices that would never have taken place without some safeguards and oversight in place. You’ve argued that there are upsides to global warming, the Iraq war, our debt, even Katrina. It’s one thing to look for a silver lining, but let’s also call this what it is - an economic disaster.

Posted by: Max at December 31, 2007 12:39 AM
Comment #241825

Max

It is a bubble bursting. It happened at the end of the 1990s with the dot.com; it happened in the early 1990s with housing and it is happening now. It is always hard on some folks.

The property values have been rising since around 1997. It is a worldwide rise. Prices in UK, New Zealand, Ireland have risen faster than ours and now are also falling. Even in safer areas of Iraq, prices are rising, BTW.

This correction has an obvious up side in making housing more affordable. I only wish it had come a little earlier, but the nature of bubbles is that they go on too long. That is why they are bubbles.

I am sorry if you do not like reality, but that is what happens. The only way you can avoid the pain of correction is to prevent the prosperity growth in the first place. Cry about it if you want.

Generally re looking for upsides, that is the mark of effective people. We adapt and look for opportunities. Send me to hell, and I will be working on how to benefit from the heat exchange. I will not appologize for being smart. Those who take what they get and make it better are those who do the work that pulls society up.

Please explain to me, BTW, how a prudent person who bought a home a couple of years ago, lives there and plans to stay for awhile is affected in a practical way by the decline in his home price? I am a home owner. I saw my home rise in value and now drop in value. It was the same house and my cost of keeping it remained the same. The only thing I cannot do if the price declines is borrow more money against the increased value and that is a dangerous and imprudent thing to do anyway. I understood that lesson years ago; some others have just got the news. Presumably they will be smarter later.

Posted by: Jack at December 31, 2007 2:34 AM
Comment #241827

Jack
Perhaps you underestimate the potential problem. Of course the bubble is correcting. This is to be expected when the relationship between value and cost becomes so out of whack.Unfortunatly there are other,preventable ,complications that could trigger a major downturn. Sub-prime is only part of the picture. A great many people leveraged their homes to the hilt.Many will wind up oweing much more than their home is worth.Some will be forced to default or sell short,furthur deepening the price fall.Some,and soon to be many,are reaching the end of their careers and had been counting on a degree of stability if not appreciation to cover the debt and help with their retirement.
These are not stupid people and many of these loans were taken for very good reasons like putting children through college or helping family members buy their own overpriced homes.
I think it is pretty clear the reverberations will go on for some time and may have profound negative economic and social cost.
Underlying all this is the failure of wages to keep up with cost.This failure was concerted.The policies responsible,both governmental and private,need to be changed if we want to stabilize and grow the middle class.


Posted by: BillS at December 31, 2007 3:45 AM
Comment #241828

Jack
Sure the high price of oil will lead to some conservation efforts.It may lead to some furthur developement of alternates but will not lead to the fundemental changes needed to gain independance from oil.This bubble too will burst. It may even be pricked purposly to collaspe any real alternate industry.I would much rather see high prices as a result of your carbon tax coupled with a flexible tariff than pumping more trillions into the coffers of the oil trust,useless speculators,and Middle-East despots.People WILL die this winter ,in the richest country on earth,because of these prices. At least with your tax we would have the funds to subsidize heating oil for the poor or help them help them use other means to keep warm.

Posted by: BillS at December 31, 2007 4:01 AM
Comment #241832

BillS

We agree that it would be best to have higher gas prices because of a carbon tax. As we discussed before, that makes two of us. It is not a popular stand.

The anti-poverty program that works is earned income credit. I would also agree that some of the carbon tax could be devoted to that. But we need to sell the carbon tax first. I talk to anybody who will listen re. If we can make it less unpopular, it has a chance.

Re housing, I would prefer everybody be happy forever, but it is not possible. Home prices got out of hand, as they are apt to do. I remember the late 1980s. The big difference this time is that the price rise is almost worldwide. America was not the only country affected nor did we lead the trend. This makes it a serious problem, but the solution remains that same: prices drop.

The Fed needs to add liquidity to the system to avoid a more general problem. THat they are doing. Other than that, there really is no remedy we should pursue.

I would think that lenders will want to extend loans and do other things to avoid losing their whole investment, but some people are going to end up owing more than they own. As long as most of them can pay it back, it is a local problem.

Trying to prop up bad debt will make the pain last longer & lower home prices are desirable anyway.

Posted by: Jack at December 31, 2007 9:49 AM
Comment #241835

This is funny:

http://blip.tv/file/520347

Posted by: KansasDem at December 31, 2007 10:31 AM
Comment #241836


A carbon tax on profits will spur the development of alternatives far better than a carbon tax on consumption. A carbon tax on both consumption and profits will really get the ball rolling.

Posted by: jlw at December 31, 2007 10:52 AM
Comment #241852

Carbon taxes make no sense to me. We all want to develop new energy sources to replace oil and become less dependent upon others for our energy. Since we all are mature and understand that government doesn’t create anything material, we must rely upon private enterprise. Government can provide cash and tax incentives to pursue this goal. Using “earmarks” in our bloated federal government for this use, rather than sending pork back home to get re-elected, could provide the funds. And, while the technology is being developed, we won’t be paying even more “artifical” taxes at the pump to make the global man-made warming theorists feel good.
Many states have increased the tax on cigarettes to raise revenue. They claim it is to reduce the number of tobacco users and to offset the additional cost of treating smokers. That’s bullshit. In Texas, we have huge tobacco taxes and not one penny, as far as I know, is being used to help folks stop smoking or in treating their medical problems. Correction, once in awhile I do hear or see a radio or TV commercial asking folks to stop smoking. The tobacco tax money generated goes to fund other state objectives. When every smoker stops smoking where will the money come from to fund these programs? Higer taxes most likely. In much the same way, increasing the pump price of gas by taxing it at higher rates will reduce consumption which in turn will reduce the amount of revenue being collected and cause huge damage to our economy. Al Gore and his phony scare tactics are among the greatest dangers we face.

Posted by: Jim at December 31, 2007 1:44 PM
Comment #241859

Jack,

This is one of those times when our contrarian views are in close alignment. I agree with you on both counts that the current price movements are desirable. The thing which upsets me, however, with respect to the current housing crisis, is not the likely overdue correction in pricing, but the (hopefully soon to be previous) legality of the immoral practices of the predatory lenders who coaxed buyers into risky mortgages, where those buyers are left holding the bag when things fall apart, while the unscrupulous lenders and their underwriters are in most cases unindictable.

Posted by: Walker Willingham at December 31, 2007 2:44 PM
Comment #241862

Jack said: “It is a bubble bursting. It happened at the end of the 1990s with the dot.com; it happened in the early 1990s with housing and it is happening now. It is always hard on some folks.”

Thank you for this demonstration of compassionate conservativism. ‘Didn’t hurt, me, so sure it is hard on some folks, but, overall a positive thing.’

Never mind that the federal government is backing rescue refinancing by dipping into future unfunded mandates, yet again. Never mind that the ‘some folks’ you mention, actually will number in the millions by the end of 2010. Never mind that it was Republican’s penchant away from regulation that allowed this bubble to become what it is. Never mind that this bubble was in the public media as early as mid-2006 when I wrote about it here on WB, but, the President and Congress absolutely refused to act to mitigate the event until AFTER the bubble burst and the economic and financial hits were unavoidable.

Jack, you are a Republican apologist. And I tip my hat to you for this rather well done article subtly excusing Republicans for having had any hand in the matter or consequences, and touting this event as a positive.

Unfricking believable that you can spin a perfectly preventable hardship allowed unnecessarily to become so, as a positive event. It’s like arguing to the Japanese of Hiroshima and Nagasaki weeks after the A-bombs that we did them the favor of giving them a rebuilding opportunity.

Throw in NOT just higher gas prices, but higher energy prices across the board including home heating costs up as high as 90% over previous years, and again you tout as a positive, despite the fact that astute and liberal groups have been calling for energy conservation and reform since the 1960’s.

Fact is, if wealthy conspicuous producers and consumers had not resisted every inch of the way, America could be running on energy costing 20% of what we are paying today had the elites listened to the reformers in the 60’s and 70’s. But, there were profits to be made, and no Republican will work for future interests tomorrow when there are profits to be made today.

How quaint that Exxon/Mobil, Marathon, and GM now run commercials advertising themselves as “Green” companies. What despicable nonsense. And what fools who watch such commercials and fail to recognize the cover-up they represent for how we arrived at where we are with the greasing of politician’s palms over the decades.

Posted by: David R. Remer at December 31, 2007 4:05 PM
Comment #241863

David

I suffered from the corrections in the stock market in 2000 and recently my home is worth a lot less. Life is tough all over. The high home prices were hurting prospective buyers and making owners richer. I like the idea that more people can own their own homes. Propping up prices does not enhance this opportunity.

I do not think this was an easily preventable tragedy. In fact I argue with all three words – easily – preventable – tragedy. Rather is a naturally occurring event.

You could avoid some foreclosures if you tighten credit standards. That has the cost of preventing many poor people from getting credit. None of them get a chance to buy a house at all because you want to protect some of them from bad decisions and bad luck.

BTW – the rise in real estate prices was a worldwide phenomenon. The U.S. did not lead it. It is just that the U.S. is such a big market that it makes the most difference. This makes me wonder how easily preventable it would have been. If the same thing happened over a variety of systems and diverse places, maybe the cause was something not easily anticipated or controlled. Do you happen to know why prices of housing all over the world rose during the last ten years? If you do, you can probably do a lot of good and/or make a lot of money explaining it in detail.

Re conservation - I am all for it. Where is it manifest? Higher prices drive conservation. If you use 20% less, you get an automatic 20% rebate of what you would have paid. Sweet.

American emissions of CO2 actually dropped in 2005-6. This was the first time this EVER happened during a time of robust growth. What caused this happy outcome? What Bush policy was responsible for doing what Clinton or Carter could not accomplish?

Or maybe it was just the price.

Jim

Please see above. The carbon tax makes carbon based fuel more expensive. It gives an automatic advantage to alternatives and conservation. It requires no additional bureaucracy or rules to achieve this.

Posted by: Jack at December 31, 2007 4:26 PM
Comment #241873

What would have happened if, after 9-11, Congress, with the support of the president, had enacted a fifty-cent per gallon “terrorism” tax? In your comments, Jack, you seem to be implicitly criticizing an unfettered free market for the disruption caused by high home prices and, relatively, low gas prices.
Maybe government had a role to play in this and failed in its duties. Maybe, had government stepped in and “interfered” with the free market, we would have had less sprawl, less pollution, lower housing prices, and be fighting the war on terror with actual money instead of our credit card issued by that bank in China.

Posted by: Charles Ross at December 31, 2007 6:07 PM
Comment #241874

“Do you happen to know why prices of housing all over the world rose during the last ten years? If you do, you can probably do a lot of good and/or make a lot of money explaining it in detail.”

I can sum up the reason that housing and energy prices have gone through the roof in one word.

Speculation.

Posted by: Rocky at December 31, 2007 6:51 PM
Comment #241887

Charles

I am not criticizing government for the home prices. This correction is just something that happens. Government (the Fed) should add liquidity as needed.

I am generally supportive of a tax that drives up the price of gasoline, but not for the usual reasons.

Rocky

I think your root reason is correct. Interesting that it happens in so many places at the same time.

Posted by: Jack at December 31, 2007 10:57 PM
Comment #241892

Jack, I love it when Republicans call the house still standing amidst tornado devastation a miracle of god, the devastation an act of nature, and economics a “naturally occurring event”.

Economics and the management of money and contracts is a purely artificial enterprise having nothing to do with nature. If you call this absence of political will to regulate ‘natural’, you must concede then also that communism is natural, since it was an invention of human nature as well. Somehow, I don’t think you’re willing to go over that precipice, are you?

This sub-prime mortgage industry debacle was entirely foreseeable, preventable, and unnatural. It was based on action toward goals without concern for consequences, actions toward greed without concern for the plight of the buyers down the road as well as the hedge fund investing which shored up the massive exploitation without accountability or rational care or responsibility toward investors in those funds beyond stating there is some risk in so doing so.

Just as the Credit Card debacle has been foreseeable for years, entirely preventable, and very unnatural as usury has been defined as both unethical and immoral. I foretold this debacle myself in April of 2005 in combination with the ill advised Republican bankruptcy reform.

But who cares, right? America is only good at reacting to disaster these days, not preventing disaster, as nearly every event since 9/11 seems to reinforce: Katrina, pork spending, national debt, unfunded entitlement mandates, Iraq (a whopper of a disaster), education, illegal immigration, border security, transportation infrastructure, etc. etc. etc.

But, this kind of reaction violates a basic prudent wisdom of human living: “an ounce of prevention is worth a pound of cure”. Eventually, we will not have the resources to react appropriately, rebuild, or rectify our failures prevent disaster. That too is clearly in our future as plain as daylight on a cloudless morn’. Will we avert such a climactic end? Greenspan called one such outcome: “the end of democratic capitalism’.

Kind of like telling a 20 year old to wear a helmet and leathers while riding their motorcycle. They are invincible; their entire 20 years is proof of it. Only difference is that our nation is 200 years old instead of 20, but, young enough in the history of mankind to act as foolishly.

Posted by: David R. Remer at December 31, 2007 11:50 PM
Comment #241925

When I was in high school we were taught how to manage a farm in Ag. class. Some of these posts show a lack in simple understanding of the dynamics in ANY market.
There are cycles when prices go up and everyone goes in that direction. This causes a glut and the prices bottom out causing people to get out of it. You switch to corn from oats and from beef to dairy to take advantage of this. It gives meaning to a “natural cycle”. The housing market is no different. Credit is also the same. Loose standards causes more credit causes defaults causes tighter standards.
To claim you predicted something that is a part of a normal cycle has no meaning.
I am a builder that had to leave my state to work. Sitting around passing blame is not constructive. It is kind of like complaining about weather. (Maybe global warming is a form of doing that too.) Libs are good at finding third parties to blame for every misfortune.


Posted by: Kruser at January 1, 2008 8:10 PM
Comment #241930

Kruser-
Natural cycles aren’t natural. They’re not even really cyclical.

To call them cyclical implies that the reasons for the downturn are inevitable expressions of the system at work.

It’s a nice way of avoiding the notion that this all occured because people made certain kind of choices, or manipulated information and pricing to artificially affect supply and demand. If the system is always its own autonomous beast, then why regulate? It’s like trying to make cattle obey traffic signals.

At the heart of this calamity, though, are some rather dodgy financial processes, which when factored together, let a much bigger problem emerge. First, predatory lending ensured you had a bunch of people put into loans they couldn’t afford (though the people making them the loans would hardly tell them that.)

Second, the industry securitized debt so they could finance riskier and riskier debtors, but forgot to create a way in which their packaged securities could be examined to establish their value. This meant that at the end of the day, when the mortgage industry overdid it, nobody knew what they were getting.

Third, having overdone it, they also cheated their way into getting better ratings on the debt than it really deserved, meaning people were buying into more risk than they thought they were.

Fourth, the securitized debt of the bond markets and of the mortgage industry were little different from one another in their opacity, so when people realized securitized mortgage debt was difficult to properly evaluate, the uncertainty also encompassed the debt of corporations.

Fifth, the permitting of the growth of the speculative market contributed to an environment where otherwise affordable property became ridiculously expensive.

To sum this all up, what we have here is a system where some are trying to make money that isn’t really there, creating fictional value, selling that. That, more than anything natural, creates the large scale booms and busts.

There are some choices as to how to behave in a market that have no redeeming purpose to them. They only serve to gum up the system, create economic problems that have nothing to do with any natural state of affairs.

A recent example? Speculators kicking the value of oil sky-high. Justification? Let’s try this on for size: the risk of war with Iran. Nothing real, just some possibility. Or manipulations where the speculation works hand in hand with production, as with energy deregulation, where the efficiency of the system isn’t even the point. They want to create artificially scarcity, and in California, they created it, and raked the state over the coals making them pay good money for that.

What Jack is advocating isn’t the natural motions of the market, it’s standing by while people continue to deliberately screw up the markets for their own profit.

Posted by: Stephen Daugherty at January 1, 2008 10:11 PM
Comment #241948

My company has remodeled numerous repos. All of them were from government backed loans.
Why is it when the government backs a loan for someone who wouldn’t otherwise qualify, it is called “helping the poor” and when the private sector does the same thing you call it “predatory lending”?
What profit is there in defaulted loans?
Do you think now that these speculators have learned their lessons we need to move on?
Is this non cycle going to repeat or are people that stupid? (Or the elitist term “like cattle”:)
Markets consist of real people and not hypothetics.

Posted by: Kruser at January 2, 2008 5:16 AM
Comment #241957

Jack,

It happened all at the same time because those folks that do it for a living took their profits all at the same time, and left the less astute holding the bag.

Kruser,

People individually are mostly pretty smart. People, as a group, are cattle, and are easily spooked.

Posted by: Rocky at January 2, 2008 11:26 AM
Comment #242120

Why is it when the government backs a loan for someone who wouldn’t otherwise qualify, it is called “helping the poor” and when the private sector does the same thing you call it “predatory lending”?
What profit is there in defaulted loans?
Posted by Kruser


Interesting question, Kruser! Perhaps we should ask Hillary.

Marc Lasry, who was named one of Hillary’s top contributors from Wall Street, (and overall) to the Democratic Party, has made his billions buying up the stocks of defaulted and bankrupt American, European, and Asian companies while the businesses were trying desperately to stay afloat.

He started his companies back in the 90’s, pretty much from scratch, and apparently made a killing in the Asian markets when they went South. Bankruptcy and default is his specialty. A story I read about him particularly mentioned a deal in Indonesia.
So, I guess if you’re a really smart Democrat there’s some “extremely good” money in bankruptcy and default! Certainly enough to share with nearly everyone in the Democratic Party.

JD

Posted by: JD at January 3, 2008 11:05 PM
Comment #242409

Oh, I forgot to mention, Lasry just hired Chelsea Clinton to his firm last year. So, the Clinton family now has a bonafide “vulture investor”.

Hillary must be proud!!

Maybe, with mom’s help, and with the help of some of her anti-business Democratic colleagues, Lasry’s firm could make a killing in America on business bankruptcies and defaults, if she, and more Democrats get elected in 2008.

Who knows, Chelsea might quickly climb the ladder to being Lasry’s Partner!

JD

Posted by: JD at January 6, 2008 5:30 PM
Comment #242844

Please see above. The carbon tax makes carbon based fuel more expensive. It gives an automatic advantage to alternatives and conservation. It requires no additional bureaucracy or rules to achieve this.
Posted by: Jack


Jack,

When did higher taxation cease from becoming more bureacracy and rules? If you really believe this, maybe you need to sit down with some professional tax preparers!

JD

Posted by: JD at January 12, 2008 12:24 AM
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