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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12897061 -

Bullshit.  Did you know there was a housing crisis a few decades ago that came about when mortgage interest rates were very high?  Very high.

The housing bubble was caused by government interference in the market by guaranteeing and encouraging loans to people who would not otherwise have gotten them.  They defaulted.  There would be even more defaults if the interest rates had been high.  And lots of people made lots of money during the bubble.  Tons and tons of money, a huge portion of which was confiscated by the government through taxation.


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Re: Is the housing crisis taboo? [Re: zappaisgod]
    #12901158 -

And history will repeat itself again.
That is if we live through the shit we are in now.


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where can I find this picture

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Re: Is the housing crisis taboo? [Re: zappaisgod]
    #12902919 -

zappaisgod said:
Bullshit.  Did you know there was a housing crisis a few decades ago that came about when mortgage interest rates were very high?  Very high.

The housing bubble was caused by government interference in the market by guaranteeing and encouraging loans to people who would not otherwise have gotten them.  They defaulted.  There would be even more defaults if the interest rates had been high.  And lots of people made lots of money during the bubble.  Tons and tons of money, a huge portion of which was confiscated by the government through taxation.




The housing prices would have not reached those levels with higher interest rates zap.  Come on dude.  There would have been no bubble.  No es possible, comprende?

What financed the housing crisis?  What sent the price of homes out of control?  The fractional reserve banking system can not overextend itself that far without a central bank to act as the lender of last resort.  Without the central bank bailing out the fractional reserve banks the malinvestment would have been liquidated far before the situation reached crisis level and prices would have stabilized years ago.

Banks would have gone under (not too many) and lenders would have begun to behave more responsibly were it not for the absurdly low interest rates that the 'fed set.

Greenspan is largely to blame, really.

Edited by Mr.Al (07/15/10 02:25 PM)

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12903477 -

Mr.Al said:
zappaisgod said:
Bullshit.  Did you know there was a housing crisis a few decades ago that came about when mortgage interest rates were very high?  Very high.

The housing bubble was caused by government interference in the market by guaranteeing and encouraging loans to people who would not otherwise have gotten them.  They defaulted.  There would be even more defaults if the interest rates had been high.  And lots of people made lots of money during the bubble.  Tons and tons of money, a huge portion of which was confiscated by the government through taxation.




The housing prices would have not reached those levels with higher interest rates zap.  Come on dude.  There would have been no bubble.  No es possible, comprende?



ORLY?  You might want to examine the housing bubble in the late eighties for a nifty little lesson in just how possible it is.
Quote:
What financed the housing crisis?  What sent the price of homes out of control?  The fractional reserve banking system can not overextend itself that far without a central bank to act as the lender of last resort.  Without the central bank bailing out the fractional reserve banks the malinvestment would have been liquidated far before the situation reached crisis level and prices would have stabilized years ago.



Who says they were out of control?  You continue to blame your favorite whipping boy but that is becoming more and more the desperation of a drowning man.  There can be housing bubbles with high interest.
Quote:


Banks would have gone under (not too many) and lenders would have begun to behave more responsibly were it not for the absurdly low interest rates that the 'fed set.

Greenspan is largely to blame, really.



Nope.  And lenders were behaving responsibly, Al.  They are responsible to their shareholders to make money.  You understand that, right?  Given that there was a government schmuck to buy all the crap paper they wrote and other government agencies encouraging and coercing them to do so it would have been irresponsible of them NOT to write those loans.

Greesnpan warned of irrational exuberance in the housing market and I believe he was part of the Republican group that warned of the problems at Fannie and Freddie several years earlier.  That group also included John McCain.  Barney Frank, Maxine Waters, Chris Dodd and other idiots poopoohed the idea.  Those dumb cunts are still influencing fiscal policy.


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Re: Is the housing crisis taboo? [Re: zappaisgod]
    #12903928 -

zappaisgod said:
ORLY?  You might want to examine the housing bubble in the late eighties for a nifty little lesson in just how possible it is.



same time we had the government giving welfare to the banks

http://en.wikipedia.org/wiki/Savings_and_loan_crisis

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Re: Is the housing crisis taboo? [Re: zappaisgod]
    #12905751 -

The S&L fiasco?  That had to do with the S&Ls having to compete with money market mutual fund offerings in the market.  The government borrowed money that it did not have to bail out the S&Ls which were already government subsidized.

Hardly an example of a free market in operation.

I think that interest rates should be set by the marketplace.  That is the problem that we have.  You believe that authority figures can somehow regulate and "fix" the economy.  Appeal to authority fallacy.


Greenspan didn't cause the housing bubble?  Come on.











Only a moron or somebody who is completely disingenuous would claim that they can not see mortgage rates tracking the federal funds rate.  Short term fed rates have tremendous influence on fixed long term interest rates!  If the interest rates are artificial so are the prices.


Put on your glasses if that helps.


Greenspan says ARMs might be better deal

http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm

Didn't cause bubble?  Wow.

Edited by Mr.Al (07/16/10 05:43 AM)

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12905961 -

> The housing prices would have not reached those levels with higher interest rates zap.  Come on dude.  There would have been no bubble.  No es possible, comprende?

The interest rates were irrelevant.  Banks were handing out loans to anybody that would take them, regardless of interest rates, or the ability to be repay the loan.  On one side, the banks were protected by Freddie and Fannie, and on the other side, they would get hit with lawsuits if they didn't make the loans.

> What financed the housing crisis?  What sent the price of homes out of control?

Corruption of Barney, Dodd, and company coupled with greed from Wallstreet and a bunch of bums that wanted a free ride, but never bothered to consider the consequences of taking our loans they had no way to repay.


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Just another spore in the wind.

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12905968 -

Quote:
Only a moron or somebody who is completely disingenuous would claim that they can not see mortgage rates tracking the federal funds rate.  Short term fed rates have tremendous influence on fixed long term interest rates!  If the interest rates are artificial so are the prices.



What is disingenuous is hopping from the point of "mortgage rates track the Fed rate" to "since the rates are fake, so are the prices".

The first of those assertions, you have support for. The second, you have no support for and are just trying to slip it in on the coat tails of your last point.

Not to mention the stupidity of the latter comment. If someone pays a bubble-inflated price, that price is not "artificial". It is real in every sense of the word. The price may be inflated, but it is sure as fuck not artificial.

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Re: Is the housing crisis taboo? [Re: Seuss]
    #12906018 -

Seuss said:
> The housing prices would have not reached those levels with higher interest rates zap.  Come on dude.  There would have been no bubble.  No es possible, comprende?

The interest rates were irrelevant.  Banks were handing out loans to anybody that would take them, regardless of interest rates, or the ability to be repay the loan.  On one side, the banks were protected by Freddie and Fannie, and on the other side, they would get hit with lawsuits if they didn't make the loans.

> What financed the housing crisis?  What sent the price of homes out of control?

Corruption of Barney, Dodd, and company coupled with greed from Wallstreet and a bunch of bums that wanted a free ride, but never bothered to consider the consequences of taking our loans they had no way to repay.





OF COURSE THE INTEREST RATES ARE RELEVANT!  What makes it cheaper to finance properties in the first place?

When the bubble burst people holding houses that had a market value significantly (sometimes 50 or 100K less) walked away...big surprise there.

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Re: Is the housing crisis taboo? [Re: Redstorm]
    #12906025 -

Redstorm said:
Quote:
Only a moron or somebody who is completely disingenuous would claim that they can not see mortgage rates tracking the federal funds rate.  Short term fed rates have tremendous influence on fixed long term interest rates!  If the interest rates are artificial so are the prices.



What is disingenuous is hopping from the point of "mortgage rates track the Fed rate" to "since the rates are fake, so are the prices".

The first of those assertions, you have support for. The second, you have no support for and are just trying to slip it in on the coat tails of your last point.

Not to mention the stupidity of the latter comment. If someone pays a bubble-inflated price, that price is not "artificial". It is real in every sense of the word. The price may be inflated, but it is sure as fuck not artificial.







The fact that the prices fell to the floor makes it obvious that (the housing prices) were artificial.

The ridiculous manipulation of the market by politicians looking for political gain (some fools still think Bill Clinton contributed to a prosperous America...) made the housing market artificial.

Krugman In '02: 'Greenspan Needs To Create A Housing Bubble'

Read more: http://www.businessinsider.com/krugman-in-02-greenspan-needs-to-create-a-housing-bubble-2009-6#ixzz0tqoRAoVc



The fed was fueling the housing bubble after the Nasdaq bubble burst.



When speculation is tremendously profitable there are problems in the market.  Those problems are caused by easy money.


The easy money makes for asset bubbles and an artificial market!

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12906279 -

Your monomania regarding "The Fed" and fiat currency is blinding you to the obvious. Zap is quite correct that the cost of money (interest rates) was not the major driver here. The major driver was the expectation that the value of the houses bought using borrowed money would increase enough to justify borrowing the money - no matter how expensive that money was to borrow.

For example -

Suppose I buy a house with no money down by borrowing the full $250,000 it is currently selling for, with the intention of selling it as soon as its market value hits $300,000. For ease of calculation, let's assume that in this case it takes a year to reach $300,000, as was the case in so many of the real estate markets in actual fact at the peak of the boom. I repay the loan, plus a year's interest, and pocket the rest as profit.

If my mortgage rate was 4%, I pocket a bit less than $40,000. If my mortgage rate was double that, I pocket a bit less than $30,000. If my mortgage rate was a whopping 12%, I still pocket maybe $19,000. As a matter of fact, even if I have to borrow the money at  seventeen or eighteen per cent, I am still making a bit of money.

When housing prices are rising as rapidly as they were during the runup to the popping of the bubble, raising the cost of borrowing from whatever it was at the time (and I admit I can't be bothered to look up the precise range of mortgage rates for the period under discussion, but I bet if I use 4.5 to 6.5 per cent I am not far off) by fifty per cent or even more will barely put a dent in borrowing. What matters isn't how much does that money cost, but how much the increase in value of the house outpaces the cost of the borrowed money. Yes, it is true that if you get the money for 4 per cent rather than 7 per cent, your profit will be greater, but even at 7 per cent (or, in this case, even at 12 or 15 per cent) you will still be turning a very tidy profit indeed. Better than the profit available in the equities market, for example.






Phred


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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12906554 -

Mr.Al said:
The S&L fiasco?  That had to do with the S&Ls having to compete with money market mutual fund offerings in the market.  The government borrowed money that it did not have to bail out the S&Ls which were already government subsidized.



No, Al I mean the bubble and bust in housing that took place in the 80s even though mortgage interest rates were skyhigh, which I know full well of because I had a 16% fixed mortgage.
Quote:
 

Hardly an example of a free market in operation.



Which has not one thing to do with your assertion that low interest rates cause housing booms and busts.  Kinda chops you right off at the knees.
Quote:


I think that interest rates should be set by the marketplace.  That is the problem that we have.  You believe that authority figures can somehow regulate and "fix" the economy.  Appeal to authority fallacy.



I think they by and large are set by the marketplace, Al, despite your lunatic ravings of control and simpleminded scapegoating.  And no, I do not think authority figures can fix the economy, certainly not the Fed.  I think the authority figures who have fucked the economy are Barney Frank, Chris Dodd, Maxine Waters, Andrew Cuomo, et al.  Interest rates?  Not so much. 
Quote:
Greenspan didn't cause the housing bubble?  Come on.












You ignore the fact that Greenspan warned about the housing market.
http://www.marketwatch.com/story/greenspan-warns-about-fannie-freddie
Quote:
Greenspan has repeatedly called for limiting the portfolios of the two giant companies, which have received heightened scrutiny by the Bush administration and Congress after accounting scandals, and again urged action to cap their holdings.

"In the case of the [companies]," Greenspan wrote to Utah Republican Robert Bennett, "excessive caution in reducing their portfolios could prove to be destabilizing to our financial system as a whole and in the end could seriously diminish the availability of home mortgage funds."

Also in the Sept. 2 letter, Greenspan said the concentrations of mortgage-backed securities at Fannie and Freddie are "well beyond what market forces would normally allow" because there are no limits to the portfolios' expansion.




Quote:
Only a moron or somebody who is completely disingenuous would claim that they can not see mortgage rates tracking the federal funds rate.  Short term fed rates have tremendous influence on fixed long term interest rates!  If the interest rates are artificial so are the prices.



Only a moron thinks correlation determines causality.  You might also note that in your second graph the FF rate often changes after the 30 year rate changes.  The Fed does not act in a vacuum, Al, and only paranoid simpletons think there is a cabal in control.  Joooooooooooooos.
Quote:
Put on your glasses if that helps.


Greenspan says ARMs might be better deal

http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm

Didn't cause bubble?  Wow.



There is nothing intrinsically wrong with ARMs, Al, or interest only loans for that matter.  Why are you such a paternalist?  The problem isn't the loan, it's the asshole taking it and the asshole giving it to assholes.  Those assholes being the losers who borrowed moeny they couldn't repay and the government agencies that encouraged them to do so.  NOT the Fed.


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Re: Is the housing crisis taboo? [Re: Phred]
    #12907757 -

The question is:

What made the houses themselves more affordable at their pre-housing boom prices?


The incredibly low interest rates made it more affordable.

That allowed for an asset bubble to form somewhere.

The asset bubble formed in housing because legislation made it conducive for it to form there.

Both of you are ignoring the fact that the housing boom caused a massive allocation of resources away from the rest of the economy.  This causes huge problems in employment, the financial sector, lost production in other sectors...



Why do both of you defend the federal reserve so vehemently?

I showed you how the federal funds rate influences long term mortgage rates.

If government policies and the fed made it feasible for the housing boom to occur why do you both say that they are not to blame?

They made all the conditions right for the housing crisis to occur.


I showed Greenspan talking up A.R.M.s because it just illustrates why you should never take advice from a central banker.  Check the date he was giving that advice.



The federal funds rate sets how costly it is for banks to borrow from each other.  Of course it is a major factor in creating asset bubbles.  If the cost to buy with credit is cheaper then absolutely asset bubbles become more probable.  What are you attempting to argue?

 

I never said that the fed acts in a vacuum.  You are setting up a straw man.


Edited by Mr.Al (07/16/10 05:10 PM)

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12907812 -

Mr.Al said:
The question is:

What made the houses themselves more affordable at their pre-housing boom prices?



Affordable?  What does that have to do with anything?
Quote:
The incredibly low interest rates made it more affordable.



You continue to ignore that there have been housing booms without low interest rates and you continue to babble that the housing bubble was a bad thing.  It was not.  Millions of people made tons of money.  Paid taxes.  Worked.  Too bad the bums aren't repaying their loans.
Quote:
That allowed for an asset bubble to form somewhere.



It formed in my bank account.:grin:
Quote:
The asset bubble formed in housing because legislation made it conducive for it to form there.



Yep, but not the legislation you say.
Quote:
Both of you are ignoring the fact that the housing boom caused a massive allocation of resources away from the rest of the economy.  This causes huge problems in employment, the financial sector, lost production in other sectors..



A massive allocation that created things.  Like houses.  And great amounts of employment and huge profits in the financial sector.  If there was a need for production in other sectors well then those sectors would just have to PAY MORE, wouldn't they?  Why do you love central planning?
Quote:
Why do both of you defend the federal reserve so vehemently?



Because it isn't the problem.  Obviously as I have shown over and over again.  Why do you attack it so vehemently?  Could it be the Jooooooooooooos?
Quote:
 

I showed you how the federal funds rate influences long term mortgage rates.



No you didn't.  You posted a graph that showed the FF rate tracking closely with 30 year mortgage rates.  Sometimes on your graph the FF rate changes lagged behind the mortgage rate changes.
Quote:
 

If government policies and the fed made it feasible for the housing boom to occur why do you both say that they are not to blame?



Because the Fed didn't.  In fact, Greenspan, your devil, warned about Fannie and Freddie, the real culprits.
Quote:
They made all the conditions right for the housing crisis to occur.



Greenspan had zero input on the policies that caused the problem.


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Re: Is the housing crisis taboo? [Re: zappaisgod]
    #12907843 -

Central banking is the heart of central planning.

Do you worship Karl Marx?

The lower interest rates made the asset bubble possible.

The problem with an economy with a central bank is that the interest rates are not operating according to supply/demand.  Also the infrastructure, capital goods, and capital did not support that growth-housing bubble that occurred...

The "growth" was based on credit not capital.

In a real free market you have lower interest rates when previous production and capital accumulation allows for the lower interest rate to occur.

If capital is scarce, interest rates rise naturally to create an increased incentive for saving and therefore future investment.




The central bank distorts the supply/demand relationship between the savings base and allocation of resources.


That is what I mean by the fact that we have an artificial economy.


It is also what I mean when I say that supporters of central banks are closet Marxists!


B.T.W. Greenspan warning about "irrational exuberance" is like an arsonist calling up the fire department after setting a building on fire.

Sure, the interest rate is lowered over and over again and the central banker just throws up his hands and claims that the market has gone insane.

Greenspan knew exactly what he was doing.  He used to argue for a gold standard.

Edited by Mr.Al (07/16/10 05:25 PM)

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12907868 -

Quote:
What made the houses themselves more affordable at their pre-housing boom prices?



The reduction in (and in many cases, the complete abolishment of) the amount of down payment required to get a mortgage.

As well, the further into the bubble we got, the less onerous the verification of the borrower's income became. It was possible to get approved for a loan while not having to provide any kind of substantive proof of your income and expenses.

Both of these factors were far, FAR more influential in leading people to dive into the housing market than the reduction in mortgage interest rates by three or four per cent.

Quote:
Both of you are ignoring the fact that the housing boom caused a massive allocation of resources away from the rest of the economy.



Neither of us are ignoring this obvious fact. It's just that both of us know what the root cause of the bubble was, and it sure as shit had nothing  (or very, VERY little) to do with what the Fed rate was. Yes, the housing boom caused all kinds of troubles, duh! How does that show the boom was caused by the Fed?

Quote:
Why do both of you defend the federal reserve so vehemently?



Because of all the staggering problems facing the US economy at the moment, the Fed's contribution was negligible, and nothing you (or anyone) can do to the Fed will make a lick of difference in helping the US economy climb out of its current hole. Expending any kind of effort on tinkering with the Fed's functions is like twiddling with the carburetor of a car careering towards a cliff.







Phred


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Re: Is the housing crisis taboo? [Re: Phred]
    #12907893 -

Wrong.

Here's Why:


The central bank acts as the lender of last resort for the fractional reserve banking system, the federal government, and "too big to fail (really "so well connected they can rob the American people") corporations.

The central bank can and has monetized debt.

It can thus redistribute wealth.


It can reward failure and punish those who save.

If the banks that screwed up were not bailed out they would act with far more restraint in the future.  Ditto with big business.

How do either of you define an economic moral hazard?


Capital was scarce prior to the housing boom.  The interest rates were artificially low.  That is why the boom was unsustainable and went bust.


Do you think we will be o.k. with Bernanke at the helm of the fed?





Bernanke did not see the housing crisis coming, o.k.

He was clueless.

Why do you think I am concerned about inflation?

He is Helicopter Ben and he has no idea why the economy is screwed.

You should be concerned...


Even some of the people running different banks at the federal reserve are concerned about little Benny...

W.T.F.


The White House takes Benny's words as pure economic gospel and you folks are not worried the slightest bit
.


Denial much?



Edited by Mr.Al (07/16/10 05:47 PM)

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Re: Is the housing crisis taboo? [Re: zappaisgod]
    #12907933 -

Quote:
Why do you defend the federal reserve so vehemently?



Zappa:

Quote:
Quote:
That allowed for an asset bubble to form somewhere.





It formed in my bank account.:grin:



There you go... he got rich off of the real estate bubble.  it all makes sense now.

The jig is up Zap


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http://yourlogicalfallacyis.com/

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Re: Is the housing crisis taboo? [Re: Shins]
    #12907967 -

Shins said:
Quote:
Why do you defend the federal reserve so vehemently?



Zappa:

Quote:
Quote:
That allowed for an asset bubble to form somewhere.





It formed in my bank account.:grin:



There you go... he got rich off of real estate the bubble.  it all makes sense now.

The jig is up Zap




Yet he appears to deny that the housing bubble completely fucked the economy.

Is that right zap?

Or is it that you deny the role that the fed had...

Denying the fact that the fed can and does heavily influence asset bubble formation and therefore systemic economic distortion is nothing short of disingenuous.

Zap isn't an idiot.  He just turns a blind eye to the immorality of central banking.

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Re: Is the housing crisis taboo? [Re: Mr.Al]
    #12908319 -

Again, your near-neurotic compulsion to blame everything on the Fed is blinding you to the obvious.

I honestly do not know how to explain things any more simply than I have done already. Let me try again, this time typing really slowly...

It doesn't matter how much you had to pay to borrow the money you use to purchase an investment vehicle, as long as that vehicle returns more in profit than you spent to borrow the money. This is the whole concept of leverage or "buying on margin".

See my example of a house bought for $250,000 and sold for $300,000 a year later. It doesn't matter if it is a house, a stock, a mutual fund, a contract for pork bellies, a bar of bullion, a classic car.... whatever. If you can sell it for $50,000 more than you paid for it, then it makes financial sense to spend ten or twenty or even thirty or forty grand to borrow enough money to make the deal.

Yes... of course with interest rates running at 5% you will get to keep more of that $50,000 than if you had to borrow the money at 10%, but the fact remains you still made a shit ton of money  by borrowing. You don't think to yourself... "Gee... interest rates are so high that I can only make thirty grand in a year without having to put up a dime of my own money. I better wait till the rates drop so I can make forty grand in a year without having to put up a dime of my own money."

Or maybe you, Mr. Al, do think like that. I can assure you rational investors don't.







Phred


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