"Sub-Sahara Africa growth to slow to 1 pct-World Bank"
Sub-Sahara Africa growth to slow to 1 pct-World Bank
| Reuters

Makes Sense w/o commodity growth and direct foreign investment what are you left with?

What a great report from the Harvards, they stated the obvious and concluded the obvious without casting any light on the subject. Not only no light but no heat either.

"Rebound?" Vas iz dis "rebound?" It is the height of hubris to predict a rebound sometime in the future. I want some data as to why just because there has always been a rebound that there is any validity to the assumption there will be one this time. Frankly given the track record of the academic community in recent years I'd feel more comfortable betting on heads because the last coin toss was heads.

Over at Mish's, he posted his main disbelief regarding hyperinflation:

"Given there has never been a hyperinflation in history where home prices have crashed, I have one question: Where are the hyperinflationist's recommendations to buy houses? Where? Please don't be a wimp about it. Is any hyperinflationist recommending houses?"

My first thought was that...if I thought hyperinflation was coming, I certainly wouldn't be buying now...I'd wait until hyperinflation. And not now, not when rent's crashing, average home prices still above historical highs, the well-to-do areas home prices still propped up, and possibility of increasing property taxes. Even during hyperinflation, I'd be a bit leery....who knows what kind of tax schemes the governments would impose on home owners?

What do people think?

Just for fun I glanced at the Executive Summary for the 2005 Harvard Report on Housing:

Here.

"Moreover, the US mortgage finance system is now well integrated
into global capital markets and offers an ever-growing array of
products. This gives borrowers more flexibility to shift to loans
tied to lower adjustable rates in the event of an interest-rate rise."

"Whether the hottest housing markets are now headed for a sharp
correction is another question. The current economic recovery
may give house prices in these locations the room to cool down
rather than crash if higher interest rates slow the sizzling pace
of house price appreciation. Moreover, in several metropolitan
areas where house prices have appreciated the fastest, natural
or regulatory-driven supply constraints may have resulted in
permanently higher prices."

"For now, though, house prices should keep rising as long as job
and income growth continue to offset the recent jump in short term
interest rates. House prices would come under greater
pressure, however, if the economy stumbles and jobs are lost."

'Permanently higher prices'. That had to be hilarious even then. Thanks, curious.

If you can get a loan at pre-hyperinflation interest rates and buy real assets at pre-hyperinflation prices, then you can pay off the loan easily during the hyperinflationary time.

precisely why i flipped from a 15 to a 30 @ 4.875

all this liquidity will find its way into the money supply eventually, and the FED will f*ck it up and not "mop" it up fast enough.....

i predict my mortgage payment will be the equivalent of a nice steak dinner in about 10 years.

If you can get a loan at pre-hyperinflation interest rates and buy real assets at pre-hyperinflation prices

A friend of mine just consolidated $120K in student loans to a 30-year repayment @ 1.8%

My first thought was that...if I thought hyperinflation was coming, I certainly wouldn't be buying now...I'd wait until hyperinflation. And not now, not when rent's crashing, average home prices still above historical highs, the well-to-do areas home prices still propped up, and possibility of increasing property taxes. Even during hyperinflation, I'd be a bit leery....who knows what kind of tax schemes the governments would impose on home owners?

What do people think?

If hyperinflation really were coming the thing to do would be to get the biggest possible loan you could and buy some hard asset (real estate included).

IMO the threat of inflation is not immediate, but with enough money printing it does become inevitable at some point. Even if it's 10 years away that's a potential concern for somebody engaging in a long-term loan.

Great Work.

Columbia economists without a clue vs. Harvard guys without a clue.

Please, we need some Chicago economists to show how their theories triumph over reality for a clueless trifecta.

UPDATED: This Harvard report really trumps the Columbia report. I made my comment before reading the report itself, which is actually pretty rich in detail. Shame on me for first reading the Orange County Register's report, and commenting without first going to the source document.

don't leave out the MIT economists.

Nate TG said, "If you can get a loan at pre-hyperinflation interest rates and buy real assets at pre-hyperinflation prices, then you can pay off the loan easily during the hyperinflationary time. If you wait until it sets in, then interest rates will be high and/or loans unavailable."

Exactly right. That's why I am actually considering becoming a buyer sooner rather than later, as I originally planned. You could make out like a bandit if/when inflation and interest rates shoot up.

That being said, I still think we're going to have rising unemployment, loan defaults and general deflation for a while longer. So I think house prices will continue to fall. But even so, I am considering buying, because of two things:

1. The possibility for long-term gain outlined by Nate TG above, which is how home-debtors got wealthy during our last inflationary period.
2. The fact that our wise policy-makers are incenting me to do so, giving tax credits, tax writeoffs, low-money-down loans, and no-strings-attached debt forgiveness if I walk away (in effect through 2012, if I'm not mistaken). It looks almost like a risk-free investment (with the free government put protecting me on the downside), with a potentially huge upside in some scenarios. And on top of that, I can get my wife off my back about buying a home!

The downsides: (a) the mortgage payments will likely be considerably more than rent on an equivilant property, so there is some loss if I walk away. (b) my credit would be destroyed if I walk away (but who cares if I keep a bunch of cash/gold stashed away).

It's called gaming the system, and it's what the government is encouraging honest and law-abiding folks like myself to do.

MBA education, along with higher education, examined. Good commentary on the systemic failure caused by greed and lack of ethics. To get to the article you have to scroll down a ways:

......"Failures Of Higher Education
As a culture and as a nation today’s higher education is about personal gain, plain and simple. America’s colleges and universities are flourishing today, not entirely by means of endowments, or state support, but by a pervasive change in educational standards and values. Our national infatuation with being rich as opposed to living a rich life has infected most of our institutions — including our once cherished citadels of wisdom, knowledge and culture. Higher education has been infected with business values and business ethics. It’s part of our emerging corporate state — one in which money and wealth are the only measures of success, value, accomplishment or a life well lived.

MBA Degree: License To Lawfully Steal? | Newsroom Magazine

CalculatedRisk (profile) wrote on Mon, 6/22/2009 - 10:16 am

I think I posted the one interesting chart - and that shows that the main mortgage problem was with these private label MBS

You mean it's 'contained?' [Sorry, couldn't resist.]

"the thing to do would be to get the biggest possible loan you could and buy some hard asset"

How big can one get without putting too much capital down nowadays? on the FHA mortgage website: https://entp.hud.gov/idapp/html/hicostlook.cfm . It shows a max of 700k for a one-family house loan. at 3% down, that's 21k. with the 8k back, that's 15k. So 15k leveraging 700k.

Are there any other loans that has a bigger leverage?

The other question is also, what is the real value of the 700k house in the future? because if it corrects to a historical value of 200k, or overshoots to a lower value of 120k, your 15k really is at a 10% downpayment.

Scrooge McDuck,

Wow, 700k house going down to $200 or even $120k??? I thought I was a housing bear!

That's some serious droppage, considering they've already fallen a bit.

And upon further investigation...everybody eventually dies.

GDD,
For UCs, it's 4% for low wage and 8% for 45k and above. Faculty are exempt from layoffs but staff will be pummeled which means another big hit to local tax revenues and first time home buyers.

Of course, no group default rate is lower than the rate for loans held by the banks themselves. Does that surprise ANYONE?

BSR:

"I want to know why Gov. Ahnold hasn't already laid off half the State workers - whatever is necessary NOW to decrease spending? Talking, posturing, blaming, and fantasizing does nothing to "right the ship". If I realize my checkbook is overdrawn, I stop spending TODAY, not tomorrow. I stop ALL outgoing checks except the ones that I need to slip in "under the wire" - but I STOP SPENDING."

You could lay off every state worker and not close the budget hole. That's because California's fiscal system is effed. Most of the "state" deficit actually comes from programs that are run at the county, city, and school district level. In other words, the state takes the lion's share of the money and subsidizes the localities, a very bass-ackwards system that started 30 years ago after Prop 13.

So the California state gov't funds a lot of things that would be paid with local taxes elsewhere. And aren't because local taxes don't do the job (property taxes are artifically constrained).

But while taxes in California is constrained, there is no constraint on spending, and money is distributed in the most convoluted and responsibility-diffusing method possible. For that you can blame the legislators and Arnold -- but also the California taxpayer, who for years has believe he can have fewer taxes but MORE MORE MORE services.

"Over at Mish's, he posted his main disbelief regarding hyperinflation:..."

Mish, I think, is staying true to the definitions. You can't have inflation unless wages increase along with prices - that is, the value of money, alone, changes. Price increases is a different animal. Lots of people expect price increases... but Mish's argument counters that, too: where is the money coming from to pay higher prices, higher interest, higher taxes and higher savings all at once? Not everybody can get higher prices... only non-market priced items like oil (which has a limited ability to enforce a price increase, temporarily, in spite of market reality due to the cartel-style control).

speaking of CA - cal sate education system looks as though it passed the 2 day a month furlough today...will probably last years...10% pay cut for all for now, and THEN the layoffs come. Just the start of the downward pressure on incomes in the public sector

There are layoffs, furloughs, and benefit and salary cuts for government workers at both the state and local level. Huge cuts at every level.

From a progressive perspective, I'd like to see some attenuation of these cuts with fair taxes and fair pensions.

Fair taxes would gradually change property taxes to eliminate bases with something above a 2% per year increase, roll back corporate tax cuts and car tax cuts, expand the sales tax base while rolling back the rate, bring back an estate tax fully deductible against a federal estate tax, and tax mineral extraction.

Fair pensions would include a requirement that every government worker in California pay half of the cost of their pension contribution and half the cost of any post-retirement health care benefits that is outside Medicare.

Bob Dobbs (homepage, profile) wrote on Mon, 6/22/2009 - 10:36 am
[usual distorted Prop 13 yadda yadda deleted]

But while taxes in California is constrained, there is no constraint on spending, and money is distributed in the most convoluted and responsibility-diffusing method possible. For that you can blame the legislators and Arnold -- but also the California taxpayer, who for years has believe he can have fewer taxes but MORE MORE MORE services.

You make the mistake of assuming there is substantial overlap twixt taxpayers and State spending beneficiaries.

"The land price crash occurred because some of the wealthy were tipped off ahead of time and dumped their properties"

That's what I think will happen also here. That and they don't wanna get taxed to death by state government.