Fed: Household Percent Equity Cliff Diving
Submitted by
CalculatedRisk on Thu, 12/11/2008 - 9:06am (523 comments)
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Highly inflationary.
ext
and the market just keeps on smiling.
ugh.
First time since 1952! That is some streak. Well done American Consumer!! That is probably going to stand up there with Dimaggio's 56 games.
I expect that the stat for "31% of households with no mortgage" is also declining...
Here's my name for the interesting times we're about to live in:
Greater Global No-Prosperity Sphere
Actually this is good news for many people. Negative equity + government bailout = you got something for nothing.
It's the American way.
Nation of rising sun meets nation of setting sun/nuclear winter.
Households paid off more mortgage debt than they took on for the first time on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion.
Is it necessarily true that the decrease in mortgage debt represents payments? Has the FED accounted for foreclosures and principal reductions, which must represent some loss of mortgage debt?
Greater Global No-Prosperity Sphere
I thought it was more Un-Prosperity or Anti-Prosperity (as in unwinding or deleveraging).
Yet Krugman remains silent on this fraud based bubble economy.
I'm very intrigued by the fact that mortgage debt to GDP was only 15% in 1952. What was it in 1929, and what path did it take from 1929-1952?
If in fact we're in for a GD2, the path from the current 70%+ mortgage debt/gdp, to a post-depression 15% ratio, is going to be very painful.
[the nation's households paid down their debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday]
Could it be that 'mericans defaulted on their obligations most since 1952? I mean those BKs & FCs do clear consumer debts, no?
"Households paying down their debt" is a misleading narrative, isn't it?
These are aggregate numbers, and don't necessarily describe a general trend among individual households discovering thrift and prudence. They may rather describe the increased scarcity of credit.
It's not the numbers I'm complaining about, it's just the press lede.
When will Volker step down for 'personal reasons'?
So why do you think people are actually paying off their debt?
If you listen to the news, nobody is sitting on cash. So it would seem to me that possibly people were paying off this much debt the whole time but now that they are not taking on more new debt, it "looks" like people are paying it off. Shouldn't people be hoarding their cash a bit (like the banks apparently doing)? Pay the minimum on their revolving debt in case they lose their job?
Reading Nutling's article again seems to support my notion that people are just not withdrawing cash from their house ATM at the levels they were. He notes that household assets are dropping; is this explained simply by dropping house prices or are they robbing peter (credit cards, selling on eBay) to pay paul (their mortgage)?
Equities to net worth now at historical averages for S&P500 at 900. (Fairly valued after 10+ years!)
Keith Rettig,
Thanks to the Paulson Plan, the banks are hoarding the "peoples" cash, not their own.
The Market Watch article is wrong: the change in mortgage debt equals originations minus liquidations; the latter includes repayments and charge-offs.
Most mortgages ARE paying some portion of the principle each month. What I might understand this to be is that the net NEW mortagage debt is less than this principle reduction perhaps?
OC median home price now below $400k ....$385k....ouch
Southern California Real Estate Bubble Crash Blog » Blog Archive » A Cold November for OC Real Estate
That is almost a 9% drop from October to November and 40% off the high of $642,000 from only 18 months ago
Of course, the joke is that paying down debt causes the money supply to shrink since our money IS debt. So if all the debt were payed off, there would be no money. That's our idiotic money system; without debt (enslavement) it can't exist. The sooner it collapses the better.
--
A lesson for born-and-bred dopes:
False wealth (Asset Inflation) disapepars fasters than it appears.
Crooks were able to Push Debt on inflated assets.
Jas
A day without CR is like . . . night.
OC wealth is vanishing faster than the wrinkles (due to botox)...
So if all the debt were payed off, there would be no money.
Only if the Fed pays off it's debt. Otherwise, there's $800B of FRN out there.
No way are households paying off debts. The decline in household debt is due to defaults. I guarantee it.
Most American's are broke, no way can they pay off debt.
What a sham. The media is a disgrace.
"Crooks were able to Push Debt on inflated assets." Jas Jain | Homepage | 12.11.08 - 12:58 pm
Krugman, Krugman ?....wake up man.
Wisdom Seeker, maybe. Maybe the percent is increasing since certain homeowners with mortgages are, uh, no longer homeowners (foreclosures)
Best Wishes.
Keith,
To answer your actual question, I'm not sure how to read it, but what you say makes sense. Less deficit spending due to less available credit...
ALERT____
look at line 24 of the household balance sheet on balance table B.100 (line 24)
The line item is isrestate dhistorically which drives up the sasset side of the balance sheet . there is no item given to describe why the line item is now $4 billion higher than l;ast month.
OF course no footnote..
No way are households paying off debts. The decline in household debt is due to defaults. I guarantee it.
Angry Saver | 12.11.08 - 1:00 pm | #
I'm less sure. There has certainly been a change in spending since Sept.
C&C-
With drops like that...I'm waiting to see when the system starts to not use any of these sales for comps and just labels them "distressed sales" and ignore them. Sort of like a level 3 asset structure the banks get away with. That thread on the GSE's trying to not use appraisals in mods.'/refi's may be the start of a larger more nefarious attempt to delay price discovery. Which, ironically speaking, is how we really got here in the first place.
Ciao
MS
"When prices were increasing dramatically in recent years, the percent homeowner equity was declining because homeowners were extracting equity from their homes."
And because they were trading up into much more expensive houses, so the equity from the previous home gets proportionally reduced.
Just last month I made my usual $38 payment on my credit card. But I usually purchase about $500 on it each month, and last month I really cut back and only purchased about $275. So in effect, I feel as if I am paying down my debt.
So in effect, I feel as if I am paying down my debt.
Michael M. | 12.11.08 - 1:02 pm | #
You are wrong. You are increasing your debt at a slower rate. BIG difference.
If 31% have 100% equity
and 100% have 44.7% equity,
then the 69% (those with mortgage)
have less than 20% equity...
Another 20% drop in housing prices would mean the average mortgage is under water...
We need to build more cars FAST or this economy is going to collapse!
Meanwhile, in "We're All Gonna Die Soon" news:
BBC NEWS | Science & Environment | Black hole confirmed in Milky Way
CNN: For 1st time, Americans cut debt
Monetizing the debt
Dec 2, 2008 Monetizing the Debt Axel Merk 321gold ...inc ...s
Won't need to monetize, we're all going to pay our bills, yes?
This is an unusual metric. 31% of home dwellers have no mortgage. They've gone from 100% equity to ummm well 100% equity. This despite their home value theoretically plummeting with the housing market. Personally I'd guess I've gone from 80% equity to 65% equity. It was paper before, it's paper now. I don't feel a half million poorer because I never considered the bubble prices as having made me richer in the first place.
If anything those 31% with no mortgage can expect a break on their property taxes putting more money in their pockets. Monetizing house values when counting "wealth" it isn't particularly useful when trying to gauge true wealth.
We need to build more cars FAST or this economy is going to collapse!
Car Czar | 12.11.08 - 1:04 pm | #
LOL. Maybe we need more FAST cars?!
Car Czar, is it true that the trappings of your office inlude a very large hat and an extremely tiny car?
On paying down mortgage debt: Almost all homeowners with mortgages pay down their mortgage debt every month (except IO or Neg AM Option ARMs) - so if no one is getting a larger mortgage and few new homes are being bought, the mortgage debt would decline.
That is what is happening right now. Plus foreclosures reduce mortgage debt. There are many factors, and I'm not suprised that mortgage debt is declining in the aggregate.
Best to all.
"Wealth fell at an 18% annual rate during the quarter."
What is 18% of zero?
--
"Krugman, Krugman ?....wake up man."
Anonymous,
Nobel Prize confirmed that he is an agent of the Crooks, especially, BFNYC.
Economists ARE part of the problem.
Jas
lungren-R House coined "czarina" last night. Hadn't heard that before.
Ciao
MS
I'm less sure. There has certainly been a change in spending since Sept.
Come on. U.S. banks have just written off $680 billion. It's so bad they had to allow accounting forebearance. That's not due to debt repayment. It's defaults.
It's expand debt time or implode. Hence the TARP and huge increases in Government debt.
The system is unsustainable if it is indeed to be based on output.
Our wealth creation has become a sham. The math is simple.
Economists ARE part of the problem.
I agree. All MSM eCONomists are wall street shills. Cheerleaders for an unsustainable system.
I don't buy it:
As of Sept. 30, households' total outstanding debt shrank at an annualized rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It's the first decline in household debt ever recorded in the report.
Correct me if I'm wrong, but if your house gets foreclosed on, doesn't that mean you owe less? So isn't it possible that this drop in debt is really just foreclosures?
Interesting question, curious. I feel that it probably is payments, since there's effectively no more mew.
And nobody here can get mtges, or so close to nobody that it makes no difference.
There are people who are 10 years or more into a mtg, and didn't mew, and who are actually paying some money off of the mtg.
Roughly 25 years to pay half and 5 years to pay the other half of principal on a 30 year mtg.
"The system is unsustainable if it is indeed to be based on output. Our wealth creation has become a sham. The math is simple." -Angry Saver
Krugman, Krugman ?....read/listen and man up.
What haven't we seen cliffdive on Bush's watch? The amount of assets owned by the top 2% is about all I can come up with.
CR,
Percent equity is declining and you think mortgages are being paid down?????
It doesn't square.
"U.S. households pay down debts for first time"
That is the "crisis"--to the ponzi schemers.
"Plus foreclosures reduce mortgage debt."
...if the bank's refuse to file an NOD (which is the real loss) how does that reduce the debt? Even if the property is in foreclosure at some point the actual loss has to be accounted for which is the NOD filing.....and we've seen that the levels of NOD filings are much less then actual foreclosure filings. Am I missing something here?
Ciao
MS
Krugman, Krugman ?....read/listen and man up.
You lost me.
C'mon people, think about it. If you can no longer get a HELOC (remember the chart that almost no HELOCs are being given now versus huge numbers over the past few years), debt will appear to fall because it is not rising with HELOCs anymore.
This revision was good for $4 billion in net adds to assets in the balance sheet what a joke the fed is pathetic
Flow of Funds Accounts, Third Quarter 2008
The market value of corporate equities for
domestic firms (table L.213, lines 2 and 4) has been
revised from 1996:Q4 forward to reflect improved data
sources and methods: the value of common shares of
publicly traded firms is estimated from quarterly
aggregates of micro-data from the Center for Research
in Security Prices; the value of preferred shares of
publicly traded firms is estimated using a perpetual
inventory method based on data from Standard and
Poors and Thomson Financial Services; and the value
of closely held firms is estimated using data from the
...if the bank's refuse to file an NOD (which is the real loss) how does that reduce the debt? Even if the property is in foreclosure at some point the actual loss has to be accounted for which is the NOD filing.....and we've seen that the levels of NOD filings are much less then actual foreclosure filings. Am I missing something here?
MS | 12.11.08 - 1:11 pm | #
Just had a conversation with a dude in my building who says he hasn't made a payment on his mortgage in 17 MONTHS and he is still in his house. For whatever reason the lender is reluctant to actually foreclose. He's been allocating the money to paying down his other debts. Now that's a debt reduction strategy!
@MS
Are you indicating that banks are trying to hide how much of a loss they have taken ( are taking ).... I'm shocked... SHOCKED!
What happened to sticky house prices? Orlando's median price peaked in July '07 @ 265k, Nov. '08 hit 165k. Nearly 40% in one and a quarter years is sticky? This is a crash pure and simple - and Orlando's price will return to 100k by 2010 at latest.
"Persecuted Comrade Anonymouse writes:
What happened to sticky house prices?"
Home prices are lubricated. Everyone knows that.
Right Elvis. What I said.
Technically you still owe the money until some statute of limitations runs, in recourse states, preventing the theoretical right to get a deficiency.
Remember, virtually no banks ever ask for a deficiency, so this right is strictly theoretical.
But I have no idea how or if this accounted for by the number crunchers.
Also CCs have been cut. It all does have an effect.
Mall across the street reasonably full of cars.
Angry Saver, Krugman claims he 'reads' this blog...but he is obviously not listening, since he is calling for a $1 trillion Obama stimulus plus worldwide stimulus, despite the evidence that the worldwide economy was/is in a fraud based bubble. While some consumer good prices have come down, prices for most services have not come down but need to badly.
"Mall across the street reasonably full of cars.
lawyerliz"
Big time of the year for Glamour Shots. Be on the lookout for Roubini.
And Orlando is the best mkt in Florida and will prolly recover first!!
another momentous Baby Boomer achievement. you can see precisely where they took over the economy in 1990.
What is 18% of zero?
Elvis | 12.11.08 - 1:05 pm |
That's the funny thing about populations. The data doesn't tell you that it pools in people who didn't have anything to begin with.
another momentous Baby Boomer achievement. you can see precisely where they took over the economy in 1990.
bgates | 12.11.08 - 1:19 pm | #
Aww man don't start the inter-generational flame war again!
I am womanfully trying not to respond to boomer baiting.
Just drop it, hunh?
USD - slip sliding away
I'm sorry, it just makes me angry. The boomers are collectively the drunk uncle who crashed on the couch and peed on it.
Seriously, look at the history - responsibility and growth, all reasonable, with a little bump for securitization 1983-1990 - and then WHAM in come the boomers holding plastic.
"As of Sept. 30, households' total outstanding debt shrank at an annualized rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report."
Does it really mean people paid down debts? Wouldn't the erasure of debt through foreclosures account for more than that?
Higher lending standards (downpayments, FICO, for houses, cars) slow new debt issuance.
Credit-card companies are nipping some customers' heels by lowering credit limits as customers make payments, preventing the balances from drifting back up, effectively slowing new debt issuance.
Isn't market discipline interesting?
Krugman is way off supporting a stimulus, since a decrease in household weath means people can only consume less at current prices, or the same amount at lower prices.
Which alternative will move goods/services faster on a fixed/falling net woth and income? Certainly not by supporting current prices as he suggests via stimulation.
USD - slip sliding away
Barley | 12.11.08 - 1:22 pm | #
In a Wile E. Coyote sort of way atm...
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Calculated Risk writes:
All, please do not post or respond to posts with racial / religious content. Please let me know, and I'll delete them - and ban commenters as I see fit.
Please, no name calling either.
Thanks - sorry to the many great commenters.
Calculated Risk | Homepage | 12.11.08 - 12:00 pm |
Thank you for this, CR...any chance you would consider putting a similar moratorium on Boomer Bashing? Or was that covered under name calling?
When it's not irritating me, it amuses me that posters bash Boomers on a blog provided to them at no expense by a boomer and a recently departed boomer.
Krugman claims he 'reads' this blog...but he is obviously not listening, since he is calling for a $1 trillion Obama stimulus plus worldwide stimulus, despite the evidence that the worldwide economy was/is in a fraud based bubble.
It makes sense Krugman wants to keep the sham going. He just won a Nobel Prize in sham eCONomics.
Good Grief.
We need to openly debate alternative and sustainable economic models. This forced "growth" debt model is putting too many folks in the poor house.
Mr. Krugman, if you are reading, WE CAN'T AFFORD ANYMORE PROPSPERITY!
Dow slightly red; gold 830.
Wouldn't 1990 more properly be identified as when the "Greatest Generation" started retiring? Or was it when the Gen Xers entered the workforce? These blame games are less than useless.
"For banks to lend money, two basic conditions must be bet: they must feel strong enough to provide credit; and they must feel their customers - be they consumers or businesses - are creditworthy enough"
On that statement alone, the future should be crystal clear.
regarding the NOD....maybe I should mention that they can file them all they like. It's the recording of said filing that is not being done.
recording=actual loss taken
Ciao
MS
If anything those 31% with no mortgage can expect a break on their property taxes putting more money in their pockets. Monetizing house values when counting "wealth" it isn't particularly useful when trying to gauge true wealth.
Rob Dawg | Homepage | 12.11.08 - 1:05 pm | #
No way. Property taxes = valuations x mil rate. Mil rates will be going up to counterbalance...probably to more than counterbalance...the drop in valuations...bank on it.
cd
That Household Value-to-GDP graph is a strong contender for The Scariest Chart I've Ever Seen.
The pain train still apparently has many miles yet to travel and will end in a good number of tears.
if household value as % of GDP goes down to the 1994 then we are only half way through the adjustment process! that of course is assuming that GDP doesn't decline.
Alternatively if one uses a trend line from 1952 we are about 80% done. But that of course begs the question- the trend line is upward sloping can that happen forever?
KB Toys = BK: philly.com: Philadelphia local news, sports, jobs, cars, homes
My back of the envelope calculation suggests that the reduction of mortgage debt can be accounted for primarily with foreclosure writeoffs. From the MarketWatch article:
Mortgage debt fell at a 2.4% annual rate to $10.54 trillion.
Or about $250B. Now, take about 1.5M foreclosures, with a writedown of $100K each, and you get a total debt writeoff of $150B. Given these are all SWAGs, one can easily imagine the foreclosure process carrying most of the weight of mortgage debt reduction. (It's hard to imagine American savers suddenly ponying up that kind of change otherwise.)
I with Anonymous regarding Krugman. Someone needs to stand up, and I'm sure Krugman isn't the only famous person to read this blog. Someone in a position of some power and respect needs to start speaking up. And why aren't people going to jail?
"These blame games are less than useless."
Au contraire, limiting Boomer power structures like the AARP would be a great and noble thing for the country. But it won't happen. There are more boomers than anyone else, and old people vote.
Last year I had a about $6k in credit card debt, $15k on a car loan and $380k on a home loan...for a total of about $400k in debt.
Now I no longer have the home loan (or the home), and today I have only about $25k in debt.
I have no clue why people are so sensitive to generation comments. Get a thicker skin. Who cares?
Watch the SPY bounce off 90 as the fed's black boxes kick in.
Right now.
These blame games are less than useless.
Rob Dawg | Homepage | 12.11.08 - 1:25 pm | #
Rob Dawg +10!
They are in fact, pernicious regardless of the target population. It is also a deliberate campaign of meme propagation.
Generations aside, the point is that the debt levels and patterns had a major qualitative shift in the last ~20 years.
See also the Census report yesterday that incomes fell in most places between 2000 and 2007.
But most of our "leaders" operate on the assumption that the economy of 2004 is a normal and desirable state of affairs which should be restored and perpetuated. The bailouts & "stimulus" are predicated on this.
My generation (early 80's echo boom) came into household formation age just as the bubble peaked. We got none of the gains and, unless they were like me and lit their hair on fire to draw attention to the bubble, are getting hosed. This is inter-generational theft, much worse than my pirating dvds and such. And what's the penalty? We'll be paying the interest on the bonds used to fund their pension and medical expenses!
And why aren't people going to jail?
s0mebody | 12.11.08 - 1:26 pm | #
Maybe that'll start when the gov't figures out it's either that or lynch mobs they can't control doing the job for them.
cd
"two basic conditions must be bet:"
either a great intentional typo or just a casual mistake.
Good one either way....
Ciao
MS
"It is also a deliberate campaign of meme propagation."
Isn't credit collapse just a meme?
"Someone in a position of some power and respect needs to start speaking up."
What do you suggest I do?
VIX sinking & oil rippin' higher. Guess high oil prices are healthy and stabilizes the equities market. Wall St isn't happy unless consumers are stressed to the snapping pt.
Let see, when I classify the comments of the past few days, I get
1. Generational bashing
2. Jas-a-thon
3. CR smacking down idiots
4. non-economic (but sometimes amusing fluff).
Any suggestions for a fifth category out there?
Falling for another sucker play...blame the "X" for all your woes...divide and conquer is the oldest game in the book.
Jas is right.
The decline in household debts is due to defaults/chargeoffs, debt paydown, and new homeowners taking out smaller loans than the prior homeowners (i.e., even without a foreclosure, the prior homeowner lost most or all of their downpayment).
There is also a small amount of loan amortization going on. Over time, a mortgage which doesn't get foreclosed gets paid off.
Class/Race/Generation/Party warfare is part in parcel with the MSM's need to generate controversy to make people feel like they have something to fight for as the country as a whole continues to slide off a cliff.
Any suggestions for a fifth category out there?
Anonymous | 12.11.08 - 1:30 pm | #
Occasional useful/informative links
Mr. Krugman,
Let's have a public discussion of the effects of a $1 trillion dollar stimulus before we pull the trigger.
Perhaps the first rule of mega spending should always be - DO NO HARM.
Seriously. The next bubble or unintended consequence of perma-growth just might be a commodity bubble or a resource war.
Mindless growth and spending is fools errand.
This is inter-generational theft, much worse than my pirating dvds and such. And what's the penalty? We'll be paying the interest on the bonds used to fund their pension and medical expenses!
I just stay away from areas where retirees on pension tend to live large and the costs become more reasonable. I call them "bubble zones," and they're places where the young work their asses off to enjoy a quality of life that the boomers enjoy as a given. Avoid them and you'll find your hate for boomers squelching down a little.
No way. Property taxes = valuations x mil rate. Mil rates will be going up to counterbalance... probably to more than counterbalance... the drop in valuations...bank on it. - Circling the Drain
I know there will be those attempts but the 31% without a mortgage are also far more modest than typical (median) homes. The squishdown has disproportionately (at this stage) lowered their values more than the median. And don't forget places like California and Massachusetts where potential increases are capped.
Brontide | 12.11.08 - 1:30 pm | #
It is more the MSM in service to the interests served by a populace busy chewing its own leg off rather than looking up at SOB who laid down the trap.
Sen. Claire McCaskill (D-MO)
Have the CEO's of GS, MS, C, BAC, WFC, taken corporate jets in the last month? They all got more than $15 billion.
But, but, why not "let all of the equity go to work for you"? I mean, it's just sitting there. What a waste of money. Oh shit, I need to live somewhere, don't I?
What does the Fed's J-Yello (Yellin) say about this...
8 really, really scary predictions - Nouriel Roubini (1) - FORTUNE
Fortune
8 really, really scary predictions
Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening.
What is funny about the word Czar is that it is taken form the Latin/Roman word Caesar. And we know how well the Ceasar thing worked out for the Roman Empire. Bonus points: the word Kaiser is also derived from Czar. Double dog bonus points: the word Caesar as pronounced in latin is with a hard K not an S. Pronouced correctly it sounds like "Kizer".
Anonymous writes:
...
Any suggestions for a fifth category out there?
Brontide, see PCA's remark.
While I agree "we all need to pull together," the young folks such as the bailout protester carrying a sign reading
"4.0 GPA
$90k in Debt
and No Job
where's my bailout"
point to the fact that the proposed stimuli and "remidies" affect each generation differently. House price support programs are an attempt to perpetuate the boomer's windfall profits at the expense of the young who need to buy houses.
The good news for the under 35's is that none of the stimulus seems to work, and that a long period of low asset prices is more beneficial to younger people than a "V" shaped single buying opportunity.
--
"Mindless growth and spending is fools errand."
Angry Saver,
And mantra for American economists.
Economists exist to make witchdoctors look good!
Jas
Elvis writes:
I have no clue why people are so sensitive to generation comments. Get a thicker skin. Who cares?
Elvis | 12.11.08 - 1:27 pm |
It's not that I am thin skinned about it, it's that it's ignorant and short sighted.
There's plenty of blame to go around, yet the meme propagators seem to want to fling blame for their situation on anyone else but themselves.
I remember reading a thread a few days ago where some of the worst boomer bashers were talking about their current vehicles and their desires for picking up deals this winter on M3's and boats. I kept thinking "Wha? This is down payment money on houses" and they keep claiming they'll never be able to afford a home. Weird.
I think the worst thing to be said about boomers is that some of them were responsible for raising idjits. Thankfully, I know a number of responsible young adults IRL.
Bonus quia
the man from nantucket - Tsar or Czar what is the difference?
Any suggestions for a fifth category out there?
- Anonymous
Any suggestions for a fifth category out there?
Alez T. | 12.11.08 - 1:34 pm | #
Great, I look forward to seeing posts with your and energycon's categories.
"The next bubble or unintended consequence of perma-growth just might be a commodity bubble or a resource war. " Angry Saver
Who's to say the PPT/FED didn't cause the recent oil & commodities bubble in an effort to spread fear (ie: inflation expectations) to get people/businesses to borrow/spend more now instead of later, in an effort to revive the GDP? Think about it.
And don't forget places like California and Massachusetts where potential increases are capped.
Rob Dawg | Homepage | 12.11.08 - 1:32 pm | #
I hear what you're saying, but Prop 13's days are numbered.
I would guess that, at least where I live, the 31% includes a lot of median to moderately above median properties. Much less of the 5K sq ft McMansions, but not all HUD-class fare, either.
cd
I have a valid point. Which generation was screwed the most by this bubble?
Boomer's parents (WWII Gen) - Retired, living off reverse mortgages and defined benefit pensions
Boomers - Drove up house prices, multiple purchases well before the bubble, some got out in time.
Gen X - Some bought before, many during bubble. Some also got out, but more bag holders.
Echo boom (my gen) - Experienced virtually none of the appreciation. We're either buying the peak or catching a falling knife. Hosed city.
Gen. Myspace - Young enough to buy soon to be more reasonable (mid-90s) house valuations. But will they have the money? Of course! Boomers love their grandkids more and will force more debt upon Echo boom to pay for Myspace's lifestyle.
I don't blame anyone, but myself for any problems I may have. People who blame others are just in denial.
AnonyMiss writes:
There's plenty of blame to go around, yet the meme propagators seem to want to fling blame for their situation on anyone else but themselves.
Drive around silicon valley a little while and see the overworked, top of their class, engineers working their asses off to afford an apartment next to 50-60 year olds in multi-million dollar houses they bought for $100k and you'll understand why this sort of resentment has legs. It all comes from one group of people working to maintain a standard of living which is below that of another group which enjoys its standard of living not through their own labor, but for the most part at the expense of the first group.
Anonymiss,
FWIW, I'm a boomer. That said, I think the boomers have acted sham(e)fully for decades. Way too reckless with debt.
cd,
The other biggie that seems likely to go away is the tax free internet as states and municipalities see their revenues dry up...
People who blame others are just in denial.
Elvis | 12.11.08 - 1:37 pm | #
I deny that.
Interesting that Americans are comfortable with "czars" but "central planners" are taboo.
i>point to the fact that the proposed stimuli and "remidies" affect each generation differently. House price support programs are an attempt to perpetuate the boomer's windfall profits at the expense of the young who need to buy houses. - Hubbert
Need to buy houses? Don't you mean want to buy houses? Look at these markets. It is a no-brainer to rent a very nice place for a fraction of the purchase costs. Let those "stupid" boomers continue to write a check every month on a depreciating asset and paying usurious taxes while you reap the benefits.
Drive around silicon valley a little while and see the overworked, top of their class, engineers working their asses off to afford an apartment next to 50-60 year olds in multi-million dollar houses they bought for $100k and you'll understand why this sort of resentment has legs
AMEN!
Has the SEnate voted yet?
I hear what you're saying, but Prop 13's days are numbered.
Circling the Drain | 12.11.08 - 1:36 pm | #
You think so? Doesn't California require a 2/3rds majority in the legislature to pass a tax increase? I'm pretty sure that will never happen.
I dunno. Rich people often have no loans or a very high amount of equity.
My house is not a palace by any means, and at the moment is a bit shabby, but it isn't "modest" either.
We had a goal of having a paid for house and always either paid for our houses faster than required, or had a less than 30 year mtg, and it still took a whole lifetime nearly to own a house free and clear. And yes, most mtges are smaller, because prices are down and short sales are up too.
This is your chance to get in at relatively low prices. . . but still, not yet. 6 months maybe.
Prop 13 ain't going anywhere.
I keep looking at the human aspect of this crisis. Real people in positions of power are making decisions they consider to be right. Where and what they learned and experienced is integral to the decisions they make.
I am not a victim of class envy. State college and the public library has served me well. I believe my most important life lessons were growing up in poverty. Never wanting for anything can provide a powerful disconnect to the majority of us that struggle.
"The multiple failures that beset the country, from our mismanaged economy to our shredded constitutional rights to our lack of universal health care to our imperial debacles in the Middle East, can be laid at the feet of our elite universities. Harvard, Yale, Princeton and Stanford, along with most other elite schools, do a poor job educating students to think. They focus instead, through the filter of standardized tests, enrichment activities, advanced-placement classes, high-priced tutors, swanky private schools and blind deference to all authority, on creating hordes of competent systems managers. The collapse of the country runs in a direct line from the manicured quadrangles and halls in places like Cambridge, Mass., Princeton, N.J., and New Haven, Conn., to the financial and political centers of power."
The Best and the Brightest Have Led America Off a Cliff | | AlterNet
Don't worry kids you can go to the insolvent bastards and get a hell of a deal on a loan. Wells Fargo is offering a 5.125% 30 year fixed rate mortgage (conforming limit) with 1 point
LOL
FFDIC - read that yesterday...we are approaching irrational despondentcy...thats why I think we are nearing bottom...b4 anybody flames me...I will add we will be at bottom for some time.
C&C:
Cryliic vs Latin alphabet? just taking a stab at that one.
Prop 13...is the last hope for older Californians, if that is repealed home prices will drop an additional 20-30%
Boomer's parents (WWII Gen) - Retired, living off reverse mortgages and defined benefit pensions
Persecuted Comrade Anonymouse | Homepage | 12.11.08 - 1:37 pm | #
PCA, don't forget about the hundreds of thousands in that generation that didn't get to live to see retirement due to two catastrophic wars, or what they went through in GD I.
And the boomers are going down with the ship in large numbers. They drank more of the Kool Aid than anyone else, and just when they counted on the smoke and mirrors most, they're coming up way short.
You need to keep plugging and get ready for the opportunities that broad-scale falling asset prices will bring. And recognize that your generation would have drank the Kool Aid just like the boomers did, had history lagged just a little.
cd
Agreed, Rob Dawg, about "want" vs "need."
The need is for housing. The amount of housing needed and the form of rentership (renting of property or renting of money to buy property) are matters of debate.
I don't blame anyone, but myself for any problems I may have. People who blame others are just in denial.
Elvis | 12.11.08 - 1:37 pm | #
I don't have too many problems to "blame" on others and I see your point. My issue is the tsunami of bailouts that will affect every aspect of my life moving forward that only seem to be rewarding those who have already profited and reinforce the ideal that if you are too big to fail there is no moral hazard that can't be overcome.
we are approaching irrational despondentcy
Barley | 12.11.08 - 1:41 pm | #
I totally disagree barley. I keep hearing from friends that it's a great time to buy since $1T is on the way between stimulus & TARP & autos.
"I dunno. Rich people often have no loans or a very high amount of equity."
yes but these people have the highest amount of unpaid bills I've seen with regards to "having" as opposed to not "having". Some of the "richest" people out there are amongst the cheapest and just rack up debt, i.e. unpaid bills, regardless of ability to pay. But I hardly blame them...if a system allows it then so be it.
Ciao
MS
"b4 anybody flames me...I will add we will be at bottom for some time."
Barley
At least until the mother of all long squeezes kicks in.
rich writes:
Watch the SPY bounce off 90 as the fed's black boxes kick in.
Timmy's not even taking a bathroom break. I have to and am letting go of my SKF.
Dollar down -2.13...yikes!
So, how long before people start believing that Timmy's SPX 900 scaffolding is going to hold?
The longer we linger here, the closer that 50DMA gets (currently 915). We broke through the 30DMA with Monday's burst and have been bouncing along on top of it ever since.
So, to me the question is how many bottom callers went long at 900 back before the late October dive and are now part of the "just happy to get out at even money" crowd? I wonder if that's driving the flat trade since the Monday open.
I'm dipping my toe in some ultralongs here with a tight stop. Someone is obviously buying at 900. Volume has been pretty consistent since Thanksgiving. That can't all be Timmy, can it?
You think so? Doesn't California require a 2/3rds majority in the legislature to pass a tax increase? I'm pretty sure that will never happen.
koan0215 | 12.11.08 - 1:39 pm | #
Maybe you're right. I don't see the Gen X and Echo boomers getting out and actually, you know, voting or anything.
cd
5th category-
Gold...
Gold fever sets in
Asia Times Online :: Asian news and current affairs
backwardation...
Recently thought I saw a report GE is selling a new bond issue with short term full faith and credit of US backing, to be denomiated in euros?Maybe someone has a good explaination . Why euros?
I hear what you're saying, but Prop 13's days are numbered.
"Third rail" is overused and hackneyed. How about making up a new phrase to cover this one? "End of life as we know it on this planet comes" close but fails to capture the importance.
I would guess that, at least where I live, the 31% includes a lot of median to moderately above median properties. Much less of the 5K sq ft McMansions, but not all HUD-class fare, either. - Circling the Drain
CR and I hashed this out so long ago I can't find my original work . Talking years ago. IIRC back then the 32% without encumbrances only accounted for 22% (+/-) of the asset valuations. IOW the less expensive properties.
Neither Well Fargo nor anybody else is offering any loan at any rate in Miami Dade, Broward or Palm Beach counties that I know of.
Except FHA or hard equity loans.
Maybe if your credit score is over 800. . . And your house has lots of equity somehow.
"we are approaching irrational despondentcy"
YABC
(yet another bottom call)
These are aggregate numbers, and don't necessarily describe a general trend among individual households discovering thrift and prudence. They may rather describe the increased scarcity of credit.
This makes a great point. Creditors are reducing credit limits across the board. Aggregate household debt may be declining because the banks aren't permitting people to use credit.
As a boomer with cash in the bank and a ton of mortgage equity, I claim Not Responsible for this mess....
Sen Carl Levin (D-MI) has the floor and is discussing relation of the big 3 to US Army vehicle production.
we are approaching irrational despondentcy
Irrational? The majority of Americans are now or will be wards of the government.
Free money ain't free. In fact, it's time to pay for the free lunch Greenspan gave us.
@PCA,
Echo boomers were raised like spoiled brats. Unless your family is impoverished, I bet you benefited a little. P.S. I'm an "echo boomer".
I am not a victim of class envy. State college and the public library has served me well. I believe my most important life lessons were growing up in poverty. Never wanting for anything can provide a powerful disconnect to the majority of us that struggle.
GM | 12.11.08 - 1:40 pm | #
Well said. And the reason that my kids are earning their own ways through school, as I did.
cd
YABC
squeezed
I said "apporaching" and am playing with MOM (my own money)
1 currency soon [yogi] writes:
Sen Carl Levin (D-MI) has the floor and is discussing relation of the big 3 to US Army vehicle production.
Little or none. The civillian hummer factory workers are not allowed to look at or talk to the army HUMVEE manufacturers, the plants are kept totally separate, the management structures totally separate, etc. The civillian hummer is similar in appearance but totally different in engineering to the army version. This means that humvee production could just be surgically removed and perserved while dumping hummer production.
"State college and the public library has served me well."
Another great boomer achievement - the tripling of tuition costs in public universities in the past ten years.
enough people (read institutions) know what is going on at 900. They are just along for the ride. You are right it's not all "Timmy" however the bulk of it most certainly is. The problem is that when you throw a party and everyone is invited...it means that people will leave a lot quicker then they arrived.....should they need to leave.
Ciao
MS
CR, can you make a house-value::GDP chart hedonically adjusted for house size (sqft)?
I bid 4 Quatloos for such a chart.
Thank you.
Echo boomers were raised like spoiled brats.
s0mebody
Dotto that! Friggen arrogant sense of entitlement.
KB toys bk...another failed PE deal, have any of these PE deals worked out for anyone except the PE guys who take an immediate dividend once the deal is closed. A Harvard MBA is worthless!
"Drive around silicon valley a little while and see the overworked, top of their class, engineers working their asses off to afford an apartment next to 50-60 year olds in multi-million dollar houses they bought for $100k and you'll understand why this sort of resentment has legs. It all comes from one group of people working to maintain a standard of living which is below that of another group which enjoys its standard of living not through their own labor, but for the most part at the expense of the first group."
I'm one of those over-worked engineers in the Bay Area. But sorry I have to call bullshit on the above statement. I get out of life what I put into it. If I don't want to live here then I can leave.
If enough over-worked engineers leave the Bay Area watch how fast those multi-million dollar houses plunge in value.
And I never forget that just like those 50 year olds got lucky owning a house in the right place at the right time I got VERY lucky coming into the work-force at the start of one of the biggest asset bubbles we have ever seen.
Following the above logic we should all hold resentment towards the 20 and 30 year olds that hit the dot-com jackpot, not through any particular skill but simply the luck of happening to work at the 1 out of a thousand companies in the Bay Area that went IPO.
As a boomer with cash in the bank and a ton of mortgage equity, I claim Not Responsible for this mess....
donna | Homepage | 12.11.08 - 1:47 pm | #
And as a 29 year old with no equity, little savings and a fair amount of debt, I can claim some responsibility for this mess. Your generation does not define you. Your behaviour does.
crispy&cole writes:
Prop 13...is the last hope for older Californians, if that is repealed home prices will drop an additional 20-30%
We've been over this before. The mere mention of removing Prop 13 protections would send the market 20-30% lower. Actual passage would engender civil unrest. There aren't enough National Guardsmen left to protect the legislators who voted for this. And face it, they couldn't trust the National Guard either.
lawyerliz, this is the reason that no matter what the rates are, housing recovery is going to be L shaped instead of V. Problem is there is no "inventory (supply) of qualified buyers".....unfortunately we have become of a nation of non savers and who take no responsibility (credit history)
To modify an earlier comment:
Dear Consumer,
Please buy and hold this stick of dynamite.
/that is all
CR,
You wrote, "... approximately 31% of households do not have a mortgage."
I've seen that 31% figure various other places in the past. But interpreted it as applying to "homeowners" rather than to "households" -- which includes renters as well as owners (at least as the Census Bureau uses the term).
As the percentage of households that rent is around 30%, I assume you have just gotten a little loose with the terminology, or are not following the same conventions as Census, and that you actually mean "homeowners". Is that correct?
CR and I hashed this out so long ago I can't find my original work . Talking years ago. IIRC back then the 32% without encumbrances only accounted for 22% (+/-) of the asset valuations. IOW the less expensive properties.
Rob Dawg | Homepage | 12.11.08 - 1:45 pm | #
I did some looking a while back in the local tax assessor's database, and found that the low LTV and cash sales tended to be in the middle strata...move-up types that had been accumulating equity for a while and avoiding MEW extraction. The lower end was very heavily encumbered, as was the high end. So that 22%, I believe, probably comes out of the middle, and the massively high valuations at the top end probably skew the means significantly. It might be interesting to do a more comprehensive slice-n-dice on this.
cd
The inter-generational thing is just about balkanizing the US even more, if possible.
Everyone knows who wins from that.
"we should all hold resentment towards the 20 and 30 year olds that hit the dot-com jackpot"
for every person of that age who cashed out, there were 100 VC guys twice that age who made out like bandits.
and there were also at least a few left staring at nothing but a tax bill after cashing out options at the top.
CEOs in orange jumpsuits would boost consumer confidence. The moral hazard is more than just ideology.
MS,
This market "rally" has to be troubling for Bernanke.
Oil, materials and commodities are soaring against falling financials and a falling dollar.
Talk about a scary trend.
that worked out well...
Anonymous writes:
"The next bubble or unintended consequence of perma-growth just might be a commodity bubble or a resource war. " Angry Saver
Who's to say the PPT/FED didn't cause the recent oil & commodities bubble in an effort to spread fear (ie: inflation expectations) to get people/businesses to borrow/spend more now instead of later, in an effort to revive the GDP? Think about it.
CEOs in orange jumpsuits would boost consumer confidence. The moral hazard is more than just ideology.
Speed | 12.11.08 - 1:53 pm | #
Alex, I'll take "CEO Jumpers" for $400.
"for every person of that age who cashed out, there were 100 VC guys twice that age who made out like bandits.
and there were also at least a few left staring at nothing but a tax bill after cashing out options at the top."
My point is that there's a myth built up about the Bay Area where all these brilliant engineers made the right pick at the right time to work for the right company.
I've met enough people who hit it rich and enough people who didn't in the Bay Area to realize most of it was luck, very little was skill and intelligence. Past the first 10 or so in the company most people are along for the ride.
I'm one of those over-worked engineers in the Bay Area. But sorry I have to call bullshit on the above statement. I get out of life what I put into it. If I don't want to live here then I can leave.
Sure, like the hotel california, you can always check out. Where are you going to use your professional degree? Drive a little north of the bay area and you hit willits. Drive around the country a little bit, Glenn, Colusa, Arbuckle, Red bluffs. You'll see communities there, all right, but since all the money has been sucked into the bay area, there are no jobs there. There's no way a professional can find employment there. People like to talk about how they choose to live in the bay area, but if you spend any time driving around the disaster that is outside the bubble zone. Where would you move, exactly? To the closed down beet refining factory north of Ord Bend? The dead lumber zone in Arcata?
The fact is, our financial system is structured to siphon wealth away from these livable areas and into the boomer hellzones that the major metropolitan zones have become. You earn money farming pigs in Willits, you deposit your paycheck, and the bank sends the money off to Nike or to Cablevision, so that they can overleverage a target company. That money leaves your community.
So no, my friend, there's no real choice in leaving the bay area, at least not that I can see. And I've looked.
citizen energyecon writes:
\tUSD - slip sliding away
Barley | 12.11.08 - 1:22 pm | #
In a Wile E. Coyote sort of way atm...
are in on the fun too...
citizen energyecon | Homepage | 12.11.08 - 1:23 pm |
---
Speaking of Wile E. Coyote, some bond yields
This is the market spitting in Bernanke face.. Fed to uissue dbt, then treasury looking for creative ways to raise debt...stories abound throqwin in a budget deficit orun rate $1 trillion plus and is it any wonder the dollar ever went up.
Bernanke has to go. He is an utter failure
Angry Saver writes:
MS,
This market "rally" has to be troubling for Bernanke.
Oil, materials and commodities are soaring against falling financials and a falling dollar.
Talk about a scary trend.
Angry Saver said:
We need to openly debate alternative and sustainable economic models. This forced "growth" debt model is putting too many folks in the poor house.
The reason Mr. Krugman and others don't "man up" is that they have no idea what to "man up" to.
I agree the debate needs to happen.
How do you propose to allocate (excess) Western and Chinese production?
If it can't be force-fed to the West via debt, and the "East" can't afford it, what's the allocation mechanism?
What non-production-cost economic forces do we institute at either the individual or societal level to adjust allocation flows? What's the new performance metric if it isn't efficiency?
"My point is that there's a myth"
that isn't a myth. having a good sense of who to work for and when to work for them is much more important than skills or talent in any career.
the rise and fall and rise of apple is an entertaining example.
French Doctors confirm N. Korea's Kim had stroke according to a report - DJ
Interesting headline.
Fred,
I keep posting here that the fed should buy oil futures. We need to beat the Asians to the punch. It's better to panic first.
Wiki "Prisoners Dilema"
"We've been over this before. The mere mention of removing Prop 13 protections would send the market 20-30% lower. Actual passage would engender civil unrest. There aren't enough National Guardsmen left to protect the legislators who voted for this. And face it, they couldn't trust the National Guard either."
I don't disagree with the civil unrest part of this projection, but I'm not sure I agree with the impact on pricing. Is your assertion based on the assumption that a huge new inventory would be dumped on the market by fixed income, long time owners who can no longer afford their tax bills? Because for a new purchaser, Prop 13/no Prop 13 seems like a nothingburger. Or am I missing something?
Anyone else getting sick of the word "meme"? I think I'm going to filter out all comments that use this word.
"So no, my friend, there's no real choice in leaving the bay area, at least not that I can see. And I've looked."
I've looked as well. I've found plenty of places to go. Both inside and outside the US.
It's all about choices and what you're willing to give up to gain something else.
I know plenty of people who left the Bay Area and are Software Engineers in other parts of the US and are very happy and employed.
"So no, my friend, there's no real choice in leaving the bay area, at least not that I can see. And I've looked.
Hoopajoops LTD"
I can only guess that you have made a series of bad choices that have left you stuck. Or unwilling to change. My guess is more of the latter.
FWIW, I'm a boomer. That said, I think the boomers have acted sham(e)fully for decades. Way too reckless with debt.
Angry Saver | 12.11.08 - 1:38 pm |
I see the same, but I see it across all adult generations. I also see reasonable and responsible people in each age group. It's ridiculous and wrong to blame this on "everyone" between the ages of 44 and 62.
Hoopajoops LTD writes:
AnonyMiss writes:
There's plenty of blame to go around, yet the meme propagators seem to want to fling blame for their situation on anyone else but themselves.
Drive around silicon valley a little while and see the overworked, top of their class, engineers working their asses off to afford an apartment next to 50-60 year olds in multi-million dollar houses they bought for $100k and you'll understand why this sort of resentment has legs. It all comes from one group of people working to maintain a standard of living which is below that of another group which enjoys its standard of living not through their own labor, but for the most part at the expense of the first group.
Hoopajoops LTD | Homepage |
Did it ever occur to you that they didn't live like that in their 20's or 30's either? Did it ever occur to you that it might be a house of cards they're living in? SV is a crazy place and I wouldn't want to live there but I understand why people do.
You do know that Intel, Apple, HP and other computer companies have satellite offices in the Sacramento area where wages are slightly lower but home prices are MUCH lower?
I bought my house in the previous California bubble, I paid 5x what my parents paid for their home, and mine was 50% smaller than my parents home and so was the lot.
I give up.
Indeed, a portfolio that mixes 50% stocks and 50% super-safe long-term Treasury bonds has performed almost as well over the past two decades as a portfolio that carries an 80%-20% blend of stocks and bonds. And if you're the guy holding the first portfolio, you're probably sleeping a lot better these days than the other fellow.
an online investment site recommends entering a 50% long bond position....now!
roflmao
"The only successful corners in history were gold corners, aka - hyperinflation. Keynesian and Friedmanite economists in the pay of the government thought that gold futures trading would permanently short-circuit the forces of gold backwardation, thus preventing hyperinflation from ever happening"
Of course, they will prevail.
Hoop aren't you an attorney? Can't lawyers make money pretty much anywhere?
[Prop 13...is the last hope for older Californians, if that is repealed home prices will drop an additional 20-30%
crispy&cole ]
Who cares? Is there some divine right that would entitle CA a govt bailout by the US Taxpayer when there is still plenty of wealth left in CA that hasn't been extracted by property taxes? Why are CA homes so overpriced. We need CA to have median prices before any help is forthcoming.
I also think a repeal of the exclusion on gain-from-sale and elimination over time of the home interest tax deduction would be a benefit.
Until Keynes is proven wrong, we'll have smart people driving in the wrong direction. Bernanke/Krugman are smart but wrong.
Angry, Fred-
I think he doesn't care as long as he has the ability to create the next bubble. And from the perspective of actually having sound fiscal policy yes he has been an utter failure. But that wont happen because the system need a new place for yield...if he creates it for them then he has done his job from the system's POV. Throwing the middle class under a bus is just one of those pesky consequences.
Sucks but that's all he is doing.
Ciao
MS
Krugman, Krugman ?....wake up man.
Anonymous | 12.11.08 - 1:00 pm | #
You are a worthless coward. Yeah, Krugman is the one to attack, not mankiw, or Greenspan, or worthless wretched hacks like Robert Samuelson.
You attack one of the few who has been consistently right on almost all issues, and you don't even have the balls to pick a handle and stick to it.
Jas Jain's feces carry more weight than your opinions.
Red alert..... SPY sporting an 8.
"Until Keynes is proven wrong"
how many years of consecutive GDP decline would it take? I wonder.
"entitle CA a govt bailout by the US Taxpayer"
Who do you think pays CA state taxes in CA?
Did it ever occur to you that they didn't live like that in their 20's or 30's either?
Somehow my boomer parents enjoyed, in their 20's and 30's, an educational system that did not overburden them with debt... I guess my parents weren't debt-slaves in their 20's and 30's, unlike the current generation.
bgates,
I don't blame the boomers. I blame the wealthy and powerful for abusing their positions and failing to maintain the common good.
This gentlemen does a good job examining the effect of generational dynamics.
Web Log
it'll get interesting if the handle has another 8 to go along with it...until then it's just noise.
Ciao
MS
What's the new performance metric if it isn't efficiency?
It's not efficiency now. Just look at our trade deficit.
Also, our debt system demands continuous exponential growth. That doesn't seem to work in the real world anymore. I think we've reached the limits of that system. Clearly we're growing debt, but not wealth.
Just thoughts.
"I also think a repeal..."
moral hazard will somehow be reborn! *cue "Age of Aquarius"
koan0215 writes:
Hoop aren't you an attorney? Can't lawyers make money pretty much anywhere?
You'd think that, but when people out in the sticks need a property lawyer or something really high falootin, they hire a sacramento, LA, or san francisco firm to do it. And because these larger firms in boomer zones specialize, they can do the same thing cheaper. So no, you can't live anywhere as a lawyer. As a doctor, though...
Anyone else getting sick of the word "meme"? I think I'm going to filter out all comments that use this word.
You go girl.
"The massive stimuli under way should be highly inflationary; but if the Fed helps to engineer that markets cannot price inflation into bond prices, there has to be a valve. This valve, in our view, will be the U.S. dollar; we cannot see the dollar hold up in face of the types of intervention that are under way and that we see play out. Incidentally, a substantially weaker dollar may be exactly what Fed Chairman Bernanke wants."
bearly - I would love to see it repealed...older areas of Ca would get crushed! Seniors living in muli-million dollar mansions are paying a tiny fraction of what I pay, how is that right?
While we are at it lets repeal the uneven tax system where dividends and capital gains rates are much lower than the average workers tax rates (income and ss)!
"Angry, Fred-
I think he doesn't care as long as he has the ability to create the next bubble. And from the perspective of actually having sound fiscal policy yes he has been an utter failure. But that wont happen because the system need a new place for yield...if he creates it for them then he has done his job from the system's POV. Throwing the middle class under a bus is just one of those pesky consequences.
Sucks but that's all he is doing.
"
MS great comment but I can't understand how BB doesn't grasp that UNLESS you create a new place for yield that results in a growth in wages in the US, the system will fail.
Until the US moves away from consumption you need a bubble that allows consumers to consume. Globalisation, a dead stock market, dead housing market and dead MEW have taken away the ability of consumers to sustain the debt bubble.
What bubble is there for Bernanke to create that has general worldwide wages at a level that will sustain global debt levels going forward.
I just don't see one.
Any suggestions for a fifth category out there?
Anonymous
I saw someone mention cannibals and squirrels.
crispy&cole writes:
Prop 13...is the last hope for older Californians, if that is repealed home prices will drop an additional 20-30%
crispy&cole | Homepage | 12.11.08 - 1:43 pm |
I actually believe that it's the last hope for anyone in California who aspires to home ownership. Prop 13 does not stop property tax increases, it simply caps them at a reasonable rate per year. I know my taxes go up every year (except when prices crash).
I can't think of why anyone would buy a house in a state with out of control spending where the legislature can simply jack up taxes because they have a new shiny they want to fund. This is what caused (or at least how it was sold to voters) Prop 13 to be enacted in the first place.
Now that I'm older and wiser it may have been to benefit CRE. I wasn't old enough to vote for it but I remember my parents being worried about raising kids, paying the mortgage, and trying to find money for the ever increasing property taxes back then.
Elvis writes:
I can only guess that you have made a series of bad choices that have left you stuck. Or unwilling to change. My guess is more of the latter.
No, I have made all the right choices. I lived within my means and have a law degree from a top flight school with no debt. I am smart enough, however, to recognize that I shouldn't need to be working as hard as I am, and sacrificing so much of my life, just to be financially comfortable (resistant to shocks, job loss, being able to save money). I pencil things out and realize that in the way the economy is currently structured, I don't think I'll be able to afford kids and pay for their education, or if I do have kids, they'll be the kind I never see. So my partner and I have done the responsible thing that the current economy incentivizes and put off having kids. Something's fucked with this system.
pissed in ca-
Creating and assigning options like the Fed does with currency goes along way to perpetuating how people think that area is just so much better then everywhere else.
When you can "buy" an option at say $1.50 a share...and then sell it as soon as it's issued to you for much more...you are effectively printing money. But that has been an acceptable form of "compensation" for far too long. It's exacerbated in the Bay area because many of the companies choose to pay people in this way.
The best is when certain analysts used to tout that Jobs' at Apple was only paid $1 in salary a year......
Ciao
MS
I'm under 40, am retired, live very modestly in a building that has incraesed greatly in value and I resent everyone. Old, young, rich, poor, dopes, etc. consider yourself resented. All you "niche resenters" are amateurs, IMHO.
However, looking at all the simple minded generational cohorts, the only thing that is clear is the lack of clarity about who exactly constitutes a boomer, X, Y or Z member.
The whole monolithic boomer thing is a bit over done, particularly when the demographics are considered. The boomer cohort has various lengths, but widely defined as 1946-1964. However, it can also be broken down into two cohorts, the second sometimes being called "Generation Jones" or "Shadow Boomers".
Baby boomer - Wikipedia, the free encyclopedia
Generation X is similarly not well defined. Some would start the Xers at 1959...
Generation X - Wikipedia, the free encyclopedia
Generation Y is also not well defined.
Generation Y - Wikipedia, the free encyclopedia
So the "boomers - bad!" meme is founded on some shaky conceptual groundwork from inception, as in what is a boomer? But more importantly to me, is what is the larger purpose served by proselytizing hatred towards this group (before considering its diverse makeup that includes large numbers manifestly unlike the stereotype)?
And that is all I am going to say about that.
5) Anecdotal evidence of impending collapse.
I was at the mall...
The house next to mine...
The number of homeless...
Hoopajoops, this is why academia attracts so many folks in the legal field. Burnout is endemic in the big firm world, and very few firms have the kind of culture that helps prevent it.
You attack (Krugman) one of the few who has been consistently right on almost all issues- Gary
Except for the the fact that this so called economy is based on a credit fraud bubble. Every economist knows this but most are silent and still call for a stimulus, Why, Gary?
Angry Saver:
I agree with all you're saying. The trouble is the scale of the leap we're contemplating.
If it's true that the labor component of production is steadily falling, and that productivity is steadily rising, then the value of wages has to fall (across the board) which means middle-class earning power has to fall.
So that means that productive capacity relative to buying power is increasing. Excess capacity.
Now either we figure out an equitable way to give away the excess capacity, or we lower production to equal buying power (and concurrently stabilize std of living at a lower level) or we reduce productivity to use more labor (value labor more highly).
Which of those alternatives, or maybe some new ones that I haven't thought of, should we recommend to Mr. Krugman (as the proxy for ear-to-the-ground politically powerful spokespeople)?
I am very interested in this question you've raised. Over on Dr. Roubini's blog, I've asked the group "what's the main problem with the economy".
The breadth of answers to that question is both remarkable and daunting. No wonder Mr. Krugman can't posit an answer. There isn't enough consensus among economists, let alone the political/jabbering class to define the problem, let alone generate solutions.
You make a great point, though. Please continue to hack away at it, because I think you are on to something important.
purple writes:
The inter-generational thing is just about balkanizing the US even more, if possible.
Everyone knows who wins from that.
purple | Homepage | 12.11.08 - 1:52 pm | #
Brevity is the soul of wit. Thank you, purple.
Crispy/Anonymiss
Implicit in any demand for the repeal of Prop13 is a revenue neutral readjustment of the property tax rates for everyone.
Since revenue neutral and California don't go together, Prop13 as it stands is good enough.
@Hoopajoops LTD
I probably have wealth than you, earn less than you ( both on a personal and household level ), and still have an excellent life with a wife and two children that will get a decent education.
Your choices your lifestyle... don't blame anyone else.
bgates writes:
Hoopajoops, this is why academia attracts so many folks in the legal field. Burnout is endemic in the big firm world, and very few firms have the kind of culture that helps prevent it.
Academia is a field I'd love to get into, and it is an exit option, but the competition for tenured positions is so fierce, and the wage for non-tenured positions so low (no house for us, ever!) that it looks like I won't be able to do it until I've saved up an awful lot of dough. My current plan is, indeed, to biglaw it for a few years, bank a lot of dough, and then use these proceeds to fund our child-rearing endeavors lator.
However, the idea that we would inflate out of this mess, and rob me of these years I'm spending living very tightly on a very high income and saving nearly 70% of our earnings, enrages me even further.
If 31% have 100% equity
and 100% have 44.7% equity,
then the 69% (those with mortgage)
have less than 20% equity...
Another 20% drop in housing prices would mean the average mortgage is under water...
Yes!!!!!!!
We had this discussion previously and the objection raised was that home values needed to be considered.
I agree.
CR has previously suggested, and I believe that he is correct, that homes owned free and clear are, on average, older homes owned by older people and have values lower than the national average or median.
Let's pretend that the median price of a home without a mortgage, nationally, is around $150,000 (the median price for all homes is around $200,000). Let's further pretend that the median price of homes WITH mortgages, including all the bubble areas, is $300,000 (a low-ball number, I believe).
Now 31% of homes have no mortgages, and the average equity in those is $150,000. So the other 61% of houses has a mortgage (and equity that is some % of 300,000).
For 100% of homes, the average equity is 44.7%, or 0.447 x $200,000 = $89,400.
The equation to solve is therefore
0.31150,000100% + 0.69300,000x% = 1.0200,00044.7%
46,500 + 207,000x = 89,400
x = (89,400 - 46,500)/207,000
x = 20.7%
THE AVERAGE EQUITY IN HOMES WITH A MORTGAGE IS 20.7%
We have assumed that the median value of a home that has a mortgage is 300,000. Thus the average equity in a home with a mortgage is $62,100.
If prices fall by that amount, or by 20.7%, on average ALL HOMES WITH MORTGAGES WILL HAVE NO ... 0% ... EQUITY.
The only place to argue here is the average or median value of a home WITH a mortgage versus the average or median value of a home WITHOUT a mortgage. The greater the disparity between these numbers (I am estimating $300,000 and $150,000, respectively) the uglier the picture becomes.
Unfortunately the FED cares little for producing inflationary wages and uses this argument to continue it's fallacy of keeping interest rates low. You are correct there is no bubble that can be produced to inflate wages (well that's not entirely true-but it's certainly out of it's control). They just care about the system surviving and will work to make sure it does....until it doesn't.
They've lost control of it and are trying to regain something that is not worth saving( meaning it's current structure) IMO.
Ciao
MS
"what is the larger purpose served by proselytizing hatred towards this group"
I see it as just a matter of understanding recent history. I don't hate Boomers individually, and really pity the group much more than hate them on the whole. At least those younger have a few decades to hopefully inflate the debt away in a relatively easy way. It is the Boomers who will probably have a much less comfortable retirement, fighting amongst themselves for cheap health care.
Must see charts from Mish
http://4.bp.blogspot.com/_nSTO-vZpSgc/SRVN4sw-LCI/AAAAAAAADtE/6EYg40HZUfo/s1600-h/base-money-yoy-2.png
http://1.bp.blogspot.com/_nSTO-vZpSgc/SRVLM8Kif0I/AAAAAAAADs8/Ad1Iwf_fPJ0/s1600-h/base-money-yoy-1.png
worried about raising kids, paying the mortgage, and trying to find money for the ever increasing property taxes back then.
AnonyMiss
California was on the way to becoming the most vigorous of foreclosure states for tax liens. Many were being run out of their homes and especially farms because they were having trouble paying taxes on the proerties. This was used by Corporate Farming as an excellent way in which to squeeze out the small farms and gain their land dirt cheap. When it began with homeowners and county gov'ts is when the Gann/Jarvis movement gained ground. It is patently wrong to squeeze the poorest homeowners to fund any level of gov't that is overspending and they always will if the funds are available via property confiscation. Prop 13 stopped gov't overspending in ways that we can only imagine. Now they float bonds irresponsibly instead of confiscating property to pay for their "new shiny".
I have also vocally called for a stimulus - specifically, infrastructure investment in transit, energy, communications, education.
But then I also advocate for a more socialist system. There is no shortage of manpower in this country, but there is a a really shitty allocation of those resources.
Also, I'm not content to sit and eat popcorn as the ship goes down. And if it does collapse, i'd be much happier to have buried the banks and built a high speed rail network first.
What do YOU propose?
Johnny Lee,
A weaker dollar is the game plan. Gotta move about 8 million jobs to the export sector. What that would do to China or the rest of the exporting world I don't have a clue. Unintended consequences and all that.
Good Luck to You All
Generation X is similarly not well defined. Some would start the Xers at 1959...
And that is all I am going to say about that. - citizen energyecon
Thanks Forrest. As someone born in 1959 I can tell you we feel caught in between. We call ourselves 'Tweeners. All our lives there's been a fat ceiling preventing our meritorious advancement and the follow on cohort successfully redefining culture. While not personally responsible I feel compelled to apologize to the world on behalf of the age bracket for Disco.
well, hoops, the law is much like professional sports. the public sees the high earners, they don't see the very short duration of many careers.
Hoopajoops LTD, No offense, but it seems to me you have made a bunch of bad choices and are not willing to admit it. Look outside you mental box.
@dd
Agreed, unless trade wars erupt and no market beckons US exports.
Me at 2:17 directed to Anonymous coward. Also missed a few words, should read "no shortage of manpower and natural resources".
Elvis, you seem to know an awful lot about me, my choices, and the merit of those choices. Pray tell, what bad choices might those be that you perceive?
this inter generation topic is going where?
It has me thinking I need to go out to the desert, hang out with the pops and hunt some quail...
I tend to like those baby boomers...
they usually have a beer around...
Quads in the desert outside of Lake Havasu..gold around there too..hmmmmm
thinks for the intergenerational talk..
"Gotta move about 8 million jobs to the export sector."
And export what, may I ask? Life insurance policies?
--
I post on this blog because...
There are always some people worth ignoring! Every now and then they need a kick in the butt.
Jas
"I am very interested in this question you've raised. Over on Dr. Roubini's blog, I've asked the group "what's the main problem with the economy". - OuterBeltway
Until the fraud based credit bubble economy (ie: Seinfeld Economy) is unwound, there is no answer. Everyone calling what's going on now as being deflation is actually the undoing of fraud, and should be publicized as being so by economists, not as deflation.
Until then, the experts' wheels will just keep spinning, Gary.
Wouldn't comparing the change in household value as %GDP to change in mortgage debt as %GDP present a more useful measure than using current value and debt?
Rob Dawg,
I prefer Shadow Boomer lol - 1961 - and non-traditional in just about every aspect (renter, four year old daughter, still paying graduate school loans).
But really, purple nailed it above. Turn the proles against each other and the beat goes on...
peatey writes:
If 31% have 100% equity
and 100% have 44.7% equity,
then the 69% (those with mortgage)
have less than 20% equity...
Another 20% drop in housing prices would mean the average mortgage is under water...
peatey | 12.11.08 - 1:04 pm | #
Close but not exactly, since the average value of houses w/o a mortgage is less than that for houses with mortages. The 31% is largely made up of lil old ladies who had a mortgage burning party years ago. So in reality it is more like 25% of the total housing value is mortgage free, still your general point holds about a huge percentage of homeowners with mortgages underwater or about to be.
@Hoopajoops LTD
Many choices are neither good nor bad until you decide they are. You are obviously annoyed ( at least ) that you "can't afford to have children". But from the rest of your comments you are more happy about your job, location, and other lifestyle choices than you are upset about not being able to have children.
You could move to another part of the country, get a modest job, a modest home, and have children easily if you wanted to.
Americans cut debt for first time:
The END OF TIMES is NIGH
Household worth drops by $2.8 trillion - Dec. 11, 2008
Hoopajoops LTD,
We also save a huge amount and don't have kids. We have also made a conscious decision to live in the Bay Area and deal with both the good and bad.
I could move elsewhere and take a much lower paying job and buy an affordable house. I don't want to do that now, but most likely in a few years we will do this.
But I also realize that it's people like me staying in the Bay Area and willing to put up with the crap here that keeps house prices high. If enough of us left, or refused to come what do you think would happen to house prices here?
I am quite sure that if you were willing to deal with the life-style changes and monetary changes you could make a go of it elsewhere in the US, even as a lawyer.
It's all about choices in life and being willing to take the bad/good that comes along with the particular choices on makes in life.
"Wealth fell at an 18% annual rate during the quarter."
Really it's more then that. Just wait until the corrupt bunch of thieve who run our government start send out the bills for the clean up cost.
"Pray tell, what bad choices might those be that you perceive?
Hoopajoops LTD"
You seem afraid to reinvent yourself. Your "need" to own a house. Your inability to admit you can practice law virtually anywhere (unless you lack client skills). You've got a ton of options, but you want to act like you don't. And you want to whine. This is the wrong blog to whine. It is a bitch and moaning blog, but not a "woe is me" blog.
lungren-R House coined "czarina" last night. Hadn't heard that before.
Ciao
MS
MS | 12.11.08 - 1:06 pm | #
Not a new term, the traditional title of the Queen of all the Russias, under the Romanoffs, usually the wife of the Czar, but also would apply to Cathrine the Great
--
Jay S,
Right you are. That is how I track in my spreadsheet. My data goes back to 1945.
Jas
OuterBeltway,
I think Henry George's ideas are relevant today. Inflating land and taxing labor seems a poor way to force credit into a system.
Also, in my view, labor needs more sway and capital less. Ideally, productivity should be rewarded. However, in our debt growth system, productivity is self defeating while rent seeking is self perpetuating especially in an inflationary environment.
Consider, at present our system would be better off with less productivity (inflation). That is so wrong.
Just a note, perhaps mp will agree:
Trade wars are the least of our worries in this economic environment...real wars on the other hand are baked in this cake.
I do recommend the koolaid with this cake. Exquisite. Almondy.
Delicious.
Brontide writes:
You could move to another part of the country, get a modest job, a modest home, and have children easily if you wanted to.
I'd love to do it, I hate the city, I love the country. I do not have an appetite for luxury except for those listed below in this paragraph. Not possible in this environment. I also think that many of these modest jobs are actually paying below a real living wage that permits home ownership, partial financing of a child's education, and adequate medical care, a fact which has been masked by credit and equity withdrawals. It just doesn't pencil out; I've been spending a lot of time pencilling it out, believe me.
We live with incredible, shocking frugality that seems strange and frightening to other people who are nowhere near our income level. We save almost everything we earn.
Fed is conducting an agency coupon purchase.
"Household debt falls"
Not surprising. A foreclosure will cut a household's debt by 80 percent.
Oh my, Rendell talking about liquidity traps...
Turn the proles against each other and the beat goes on...
OK, but disparate impacts to different people. Perhaps boomers, due to the large size of their age cohort, are even more incapable than most humans of realizing that many of their fellow citizens are in different circumstances (whether with regard to age, finances, health, etc.).
And many non-Boomers (especially people like me born in the birth dearth) feel our voices have been drowned out by their large and powerful demographic.
The impact of college costs and student debt is not receiving enough attention in this matter. When we talk about how much house a young family can afford, realize that many of them already have student loans roughly the size of a small house.
"Your inability to admit you can practice law virtually anywhere (unless you lack client skills)."
That's just a crock. Being a big firm lawyer is much different than doing immigration/family/individual BK law.
There's a big dropoff in pay and # of positions outside the biggest 5 or 6 cities. As explained above, big firms get most of the business due to economy of scale excluding those more individualized niches, which rarely mean an income of much more than 70K.
Is lefty's open yet?
Brad Setser: Follow the Money » Blog Archive » Quick take on today’s US trade data
Bailout dead?
G.M., Teetering on Bankruptcy, Pleads for a Federal Bailout - NY Times
"We live with incredible, shocking frugality that seems strange and frightening to other people who are nowhere near our income level. We save almost everything we earn.
Hoopajoops LTD"
Last thing. I believe you are like the guy who won't jump from the airplane, because you are afraid the parachute won't open. Fear is your biggest enemy.
SPY now has an 88 handle...no longer noise?
oops meant SPX
Treasury conducting a TY auction today. Is Ben the only one with a paddle?
"Gotta move about 8 million jobs to the export sector."
And export what, may I ask? Life insurance policies?
Wheels of the war machine need to be oiled. Some idiot in charge will eventually think of this.
Elvis writes:
You seem afraid to reinvent yourself.
Incorrect; I'm perfectly ready at any moment to drop everything and go do something totally different. Even non legal-related.
Your "need" to own a house.
It's a goal. People have them. Houses provide the kind of stability that is helpful for raising children with a feeling of security.
Your inability to admit you can practice law virtually anywhere (unless you lack client skills).
I don't think you have a full understanding or appreciation for the current legal market. This statement of yours is not true any more.
You've got a ton of options, but you want to act like you don't. And you want to whine. This is the wrong blog to whine. It is a bitch and moaning blog, but not a "woe is me" blog.
A lot of talk, but no real discussion of "choices" I've made which are wrong. Nice try, yoda.
Thread music...
This too shall pass.
YouTube -
As explained above, big firms get most of the business due to economy of scale excluding those more individualized niches, which rarely mean an income of much more than 70K.
bgates | 12.11.08 - 2:30 pm | #
Thank you for proving my point.
Oh, wow is the lawyer only earning 70K/year. That plus a simple desk job you can raise a half-dozen kids in upstate NY.
Hubbert | 12.11.08 - 2:30 pm | #
Read my post - living that now - and earlier post regarding the need to see large groups as diverse, with many or even a majority not fitting stereotypes...including your stereotype of boomers (or even shadow boomers).
PX and APD are farting
Elvis writes:
Last thing. I believe you are like the guy who won't jump from the airplane, because you are afraid the parachute won't open. Fear is your biggest enemy.
It is very astute of you to guess that I am frozen with fear. This is true for 90% of the people in my current position. It is not true of me. I fear nothing, not job loss, death, or annihilation. I have clear goals which drive me in a positive fashion and which motivate me; I am not motivated by fear. There's a difference, however, between bravery and stupidity.
"That's just a crock. Being a big firm lawyer is much different than doing immigration/family/individual BK law."
My friends who are solo practitioners will disagree. They make plenty of money in a wide variety of practices. Plus they are not in major metropolitan areas. But, they are good lawyers with good client skills. Maybe the problem is, I'm assuming too much of you guys. Some just don't have the skills necessary outside a firm safety blanket.
Bailout dead?
Only until the Republicans staple on a permanent tax cut for their wealthy friends.
"That plus a simple desk job you can raise a half-dozen kids in upstate NY."
good luck down there at the Kodak plant with that desk job
The ownership society?
Cheers,
Kilgore
"I'd love to do it, I hate the city, I love the country. I do not have an appetite for luxury except for those listed below in this paragraph. Not possible in this environment. I also think that many of these modest jobs are actually paying below a real living wage that permits home ownership, partial financing of a child's education, and adequate medical care, a fact which has been masked by credit and equity withdrawals. It just doesn't pencil out; I've been spending a lot of time pencilling it out, believe me.
We live with incredible, shocking frugality that seems strange and frightening to other people who are nowhere near our income level. We save almost everything we earn."
Maybe you should lighten up on the frugality a bit then?
We save a huge amount of our income as well. We're double income and both in the software industry. Only have one car right now, when we eat out we eat at mostly cheap Asian/Indian restaurants.
Even our Indian/Chinese friends think we are crazy frugal. And that must mean we're frugal (:
But the funny thing is we truly don't feel like we are missing anything. We vacation once a year, have money in the bank so we're not incredibly stressed about the job losses going on right now.
Why can't you become a country lawyer?
I second high speed rail, solar panels, bicycles, all with modest public stimuli.
Oh yes, and one world currency. I'm becoming a rich capitalist from my trading this year, but I wouldn't object to more socialism.
Pray tell, what bad choices might those be that you perceive?
Hoopajoops LTD | Homepage | 12.11.08 - 2:20 pm | #
Going to law school!
Brontide writes:
Thank you for proving my point.
Oh, wow is the lawyer only earning 70K/year. That plus a simple desk job you can raise a half-dozen kids in upstate NY.
I would very happily pull down 70k in a rural area with little or no change in my current standard of living.
Going to law school!
koan0215
Yes. Or going and then practicing law.
Sorta related to household savings - I'm thinking about what to do about retirement saving this coming year. I've been putting the maximum allowed into my TSP for a number of years, but may reduce it to the match. That way I can buy more survival supplies today! And I'm worried about inflation in the future, as well as thinking that it may not make as much sense to save for retirement if we now have to work until we die. Has anyone else had thoughts about this?
Erin is such an arrogant self-centered righteous bitch.
"I believe you are like the guy who won't jump from the airplane, because you are afraid the parachute won't open. Fear is your biggest enemy.."
Elvis,
You know what they say about ASSuming.
I save ~90% of my income but I also routinely make highly leveraged BETS with my savings.
jm writes:
CR,
You wrote, "... approximately 31% of households do not have a mortgage."
I've seen that 31% figure various other places in the past. But interpreted it as applying to "homeowners" rather than to "households" -- which includes renters as well as owners (at least as the Census Bureau uses the term).
As the percentage of households that rent is around 30%, I assume you have just gotten a little loose with the terminology, or are not following the same conventions as Census, and that you actually mean "homeowners". Is that correct?
I was wondering about this myself. And IIRC, it was always 31% of "homeowners", not "households" (including renters) CR...?
SPY not SPX.....if/when it sees 88.xx is what I meant.
Ciao
MS
"Erin is such an arrogant self-centered righteous bitch.
bearly"
I like to think of her as naked. It removes many flaws.
blackhat writes:
I do recommend the koolaid with this cake. Exquisite. Almondy.
Delicious.
Almondy. Hee hee!
And er, yeah, $15B bailout here dead-ish on McConnell's speech, while Sweden's approved a $3.4B bailout of Volvo and Saab are owned by Ford and GM respectively. Wowsa, guess their lobbyists are way more effective overseas.
- NY Times
"I would very happily pull down 70k in a rural area with little or no change in my current standard of living."
You wrote upthread that you living with a shocking frugality. How then would your current standard of living change making 70k in a rural area?
Pissed off in California writes:
Why can't you become a country lawyer?
You can't have a law practice without a functioning local economy. Take the drive up to Willits, and look around.
And, like clockwork, here comes the cavalry. Maybe it actually IS all Timmy.
Pissed Off In California writes:
You wrote upthread that you living with a shocking frugality. How then would your current standard of living change making 70k in a rural area?
The sentence is meant to read that a 70k income would have little or no effect on my current standard of living; living as we do, there would be no perceptible change between 250k and 70k for us.
The impact of college costs and student debt is not receiving enough attention in this matter. When we talk about how much house a young family can afford, realize that many of them already have student loans roughly the size of a small house.
Hubbert | 12.11.08 - 2:30 pm | #
The impact of choices also gets little attention. There are myriad good choices for schools that won't entail massive debt. And the whole idea that one must go to college directly out of HS may deserve re-thinking as well. A few years in the work force saving for school builds maturity that makes the ROI on college a lot higher, and it allows for accumulation of funds to be used for school costs.
As long as people keep paying north of $40K/yr for tuition, those schools will keep charging it. I maintain that you can do just as well in a state school, hell, even with a yr or two of community college to do the grunt basic English, math, and such.
I went to a state school, worked my whole way through (including two yrs as a full-time student working full time at night), and accumulated a modest amount of debt that was easily paid off in 5 yrs. I ran the numbers for one of the kids a couple years ago at my alma mater, and it's still quite doable.
I have no sympathy for someone who complains about the debt burden that put their Ivy League diploma on the wall. That was a personal choice and a burden they must bear.
cd