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Old April 10th, 2012 #41
Alex Linder
Join Date: Nov 2003
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Alex Linder

Buy a House!
by Addison Wiggin
Daily Reckoning

A little more than a year ago, a very successful professional investor declared, “If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.”

Since that declaration, house prices have continued drifting lower in most parts of the country. The Case-Shiller index of national home prices is down about 4% year over year. Even so, we’re betting this professional investor was merely early...not wrong. US housing isn’t just cheap; it is the cheapest it has been in more than 40 years. And when one considers the possibility that inflation may rear its head soon, housing looks even cheaper still.

If you think we’re crazy, you’re not alone. The housing market is a complete bust right now. The following chart shows the median home price in terms of per capita disposable income. Based on this calculation, home prices are lower than they have been in 40 years!
Old February 16th, 2013 #42
Alex Linder
Join Date: Nov 2003
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Alex Linder

Paul Krugman and Zombie Financial History

by William L. Anderson

Murray Rothbard liked to say that economist often tended to specialize in the area where their knowledge was the worst, and given Paul Krugman's butchery of the historical record, I'd say Rothbard had a good point. Regular readers of Krugman's columns and blog posts and other public statements would believe, for example, that World War II ended the Great Depression, that Jimmy Carter and Ted Kennedy (who were major forces in deregulation during the 1970s) were conservative Republicans, and that the only thing better than war to bring prosperity would be the nationwide preparation to fight an invasion of imaginary space aliens.

As always, whenever Krugman goes on a partisan political screed, truth is left behind, and his recent column is no exception. While I have no problem with his criticizing Republicans, nonetheless I actually would want for him to get his criticisms correct, especially his points that the Republican Party is dedicated to laissez-faire economics and actually cutting the size and scope of government.

Unfortunately, he decides to make essentially this set of claims:
The financial meltdown was purely the fault of private enterprise except for one governmental error: it did not regulate enough;
The GSEs, Freddie and Fannie, had absolutely nothing to do with the meltdown.

Krugman writes:

Start with the big question: How did we get into the mess we’re in?

The financial crisis of 2008 and its painful aftermath, which we’re still dealing with, were a huge slap in the face for free-market fundamentalists. Circa 2005, the usual suspects – conservative publications, analysts at right-wing think tanks like the American Enterprise Institute and the Cato Institute, and so on – insisted that deregulated financial markets were doing just fine, and dismissed warnings about a housing bubble as liberal whining. Then the nonexistent bubble burst, and the financial system proved dangerously fragile; only huge government bailouts prevented a total collapse.

Instead of learning from this experience, however, many on the right have chosen to rewrite history. Back then, they thought things were great, and their only complaint was that the government was getting in the way of even more mortgage lending; now they claim that government policies, somehow dictated by liberals even though the G.O.P. controlled both Congress and the White House, were promoting excessive borrowing and causing all the problems.

Every piece of this revisionist history has been refuted in detail. No, the government didn’t force banks to lend to Those People; no, Fannie Mae and Freddie Mac didn’t cause the housing bubble (they were doing relatively little lending during the peak bubble years); no, government-sponsored lenders weren’t responsible for the surge in risky mortgages (private mortgage issuers accounted for the vast majority of the riskiest loans).

But the zombie keeps shambling on – and here’s Mr. Rubio Tuesday night: "This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies." Yep, it’s the full zombie.
The only accusation he left out was that Republicans were responsible for keeping the space aliens away from us, thus nullifying our chances for economic recovery. But, let us take a look at the record, given that Krugman has made some very important claims.

Understand that he is quietly making the larger claim: price signals mean nothing to entrepreneurs; only government regulators and agents can understand the economy and what actually is happening, and that only government, through spending, regulation, and outright ownership and control of the factors of production, can bring about prosperity.

So, let us talk about the government's role in this whole thing. First, he leaves out an important player, the Federal Reserve System, and the fact that neither Alan Greenspan nor Ben Bernanke would admit to the creation of the housing bubble and both continued with their policies of pushing down interest rates and directing funds into the housing market through their statements and actions.

Second, Krugman ignores the simple fact that government is the single largest player in the mortgage business through its policies of encouraging and funding home ownership. To claim that the only influence government had through the housing bubble was not regulating enough is yet another Krugman howler, and his claims that Freddie and Fannie were not lending during the "peak bubble years" and that government agencies did not encourage loans to "sub-prime" borrowers is the typical Krugman rewriting of history.

I'll get to Freddie and Fannie in a moment, but the notion that the banks simply came up with the idea of lending to sub-prime borrowers on their own really does defy history. Yes, it is true that the vast majority of sub-prime loans DID come from the banks, and that their attempts to securitize these loans in order to mitigate the risks were a disaster. I have no problem with this accusation against the Wall Street firms, but there is one thing that Krugman leaves out: the infamous Greenspan-Bernanke "Put."

When the financial deregulation occurred both during the Carter-Reagan years and at the end of the Clinton administration, the government did not get rid of the moral hazard that essentially guaranteed reckless behavior. Both Greenspan and Bernanke time and again promised to "create liquidity" if the banks got into trouble, and when the markets had the trillions of the Fed standing behind them, it is no wonder that they ran off the rails. Moral hazard has a way of encouraging the very actions that lenders and the entities supporting them should not be taking.

Free markets entail both profits and losses, and when the government essentially lets the banks keep their profits but then promises to socialize the losses, why are we shocked, SHOCKED when the banks do the things they did? What Krugman refuses to do is to acknowledge that the players in private enterprise really will respond to the prospect of losses when they engage in risky behavior. Instead, he simply ignores the fact that the banks knew the Fed and the taxpayers were covering their behinds and so they could be free to engage in behavior that anyone with half a brain knew could produce very bad outcomes.

I'll make another point about the crisis: the Austrians were on it long before the Keynesians and the rest of American economists jumped on the bubble bandwagon. Mark Thornton in 2004 wrote:

Signs of a "new era" in housing are everywhere. Housing construction is taking place at record rates. New records for real estate prices are being set across the country, especially on the east and west coasts. Booming home prices and record low interest rates are allowing homeowners to refinance their mortgages, "extract equity" to increase their spending, and lower their monthly payment! As one loan officer explained to me: "It's almost too good to be true."

In fact, it is too good to be true. What the prophets of the new housing paradigm don't discuss is that real estate markets have experienced similar cycles in the past and that periods described as new paradigms are often followed by periods of distress in real estate markets, including foreclosure sales, bankruptcy and bank failures.
Furthermore, while the Austrians may be laissez-faire in their economic viewpoints, they hardly are fans of the banks and they certainly did not believe that the Fed and the housing bubble constituted a new era of prosperity. (For that matter, I warned the property tax appeals board in Allegany County, Maryland, in the spring of 2006 that the current housing situation was a bubble and that it would crash, and that government officials should not make future budget predictions off what we were presently seeing. They told me flat out that I was wrong.)

By leaving out the Fed's "Put" and the other quiet assurances from Congress and the Bush administration that the government had the backsides of the banks, Krugman ignores an important reason as to why the banks ignored price signals and engaged in reckless behavior. While I am sure that Krugman was taught early in in graduate school about moral hazard, his leaving out that important point speaks more to his intellectual dishonesty than it does his lack of economic knowledge. [in other words, krugman is a typically dishonest jew]

Freddie and Fannie

Were the GSEs actually non-players in this whole affair, as claimed by Krugman? First, if that were so, then neither entity would have gone bankrupt in 2007, since they did not have risky loans on their books. While it is true that neither GSE was responsible for the vast creation of the subprime loans and their subsequent securitization, but that did not mean they were minor players in the system at the time.

Veronique de Rugy writes:

Fannie and Freddie contributed to the housing crisis by making it easier for more people to take out loans for houses they could not afford. Beginning in 2000, Fannie and Freddie took on loans with low FICO scores, loans with low down payments, and loans with little or no documentation.

The federal government’s role in the housing market goes back at least to 1938, but that role changed fundamentally in the 1990s when the government made a push to increase homeownership in the United States. At that time, the federal government pursued several policies that were meant to encourage banks to lend money to lower income earners and to give incentives to low income earners to buy houses. The result, as we now know, was a gigantic amount of subprime mortgages at a time when house prices were starting to go down.
In other words, the encouragement to create sub-prime housing loans came from federal policies, something that Krugman ignores. (Krugman apparently wants us to believe that the banks would suddenly create a bunch of bad loans on their own, and with the full knowledge that if they lost money, the government would not be there to force taxpayers to underwrite these bad loans.) Freddie and Fannie did play a role in creating these sub-prime securities, even if Krugman and the NYT want to ignore that fact.

It gets better. Far from being an almost non-existent player in the crisis, we find that the GSEs actually did have large housing portfolios during this time:

...Fannie Mae and Freddie Mac are considered government-sponsored enterprises (GSEs). Although both were, before the crisis, privately financed, the general sentiment was that in the event of a crisis in the mortgage market, the federal government would step in and back the GSEs. In other words, the government implicitly guaranteed Fannie and Freddie's securitized loans. This allowed them to borrow at interest rates below those of the financial markets and to hold much lower capital requirements than commercial and investment banks. The aggregate value of this subsidy has been estimated to range "somewhere between $119 billion and $164 billion, of which shareholders receive respectively between $50 and $97 billion. Astonishingly, the subsidy was almost equal to the market value of these two GSEs."

As a result, by the time the housing crisis began to unfold, Fannie and Freddie had become the dominating force in the secondary mortgage market, providing 75 percent of financing for new mortgages through securitization at the end of 2007. At the end of 2010, they still held about 50 percent of securitized, first-lien home loans.
Economist Russ Roberts also investigated and found that Freddie and Fannie were more like silent partners in the crisis, contra Krugman:

Fannie and Freddie bought 25.2% of the record $272.81 billion in subprime MBS [mortgage-backed securities] sold in the first half of 2006, according to Inside Mortgage Finance Publications, a Bethesda, MD-based publisher that covers the home loan industry.

In 2005, Fannie and Freddie purchased 35.3% of all subprime MBS, the publication estimated. The year before, the two purchased almost 44% of all subprime MBS sold.

We are not speaking of insignificant numbers. Furthermore, as de Rugy points out, Congress and the administration were not exactly non-players in setting the table for a housing crisis:

In addition, lawmakers in both parties enacted policies directed at increasing home ownership rates, resulting in lower mortgage underwriting standards for Fannie and Freddie. Roberts notes that from 2000 on, Fannie and Freddie bought loans with low FICO scores, loans with very low down payments, and loans with little or no documentation. Contrary to Paul Krugman’s assertions, Fannie and Freddie did not "fade away" or "pull back sharply" between 2004 and 2006.

As the following chart from Roberts’ study shows, during that same time Government Sponsored Enterprises (GSEs) bought near-record numbers of mortgages, including an ever-growing number of mortgages with low down payments.

Moreover, as the chart below shows, while private players bought many more subprime loans than Freddie and Fannie, GSEs purchased hundreds of billions of dollars worth of subprime mortgage-backed securities (MBS) from private issuers, holding these securities as investments. (The charts are shown in the Roberts article.)
What Krugman would have us believe is that the government, along with its Frankenstein financial creatures of Fannie, Freddie, and the Community Redevelopment Act, only wanted banks to make sound mortgages with the usual minimum of 20 percent down, good credit scores, and the like. That clearly is nonsense. As Thomas DiLorenzo notes, the only way that banks on their own would have made such risky loans was the fact that federal policies demanded they do so. [ie, queers like jew barney frank trying to push more undeserved assets to useless niggers and illegal aliens, even though they weren't creditworthy]

One does not need to hold the banks to be innocent bystanders to recognize the role of government policy in the financial crisis. Furthermore, while I have no problem with financial deregulation, I DO have a problem with financial deregulation that is backed by moral hazard. Deregulation was supposed to free financial entities to diversify their loan portfolios and to be able to provide liquid capital to entrepreneurs and businesses that had promising and new ventures.

Furthermore, financial deregulation did make possible the revolution in computers and telecommunications, and had we kept the regulatory system Krugman endorses in place, there would be no Apple Computers, cellphone networks, improved transportation, and IBM would still be the industry leader in the dominant mainframe computer business. Since Keynesians know nothing about entrepreneurship and even less about finance, Krugman probably is incapable of understanding how economies grow, still being stuck in the "aggregate demand" intellectual ghetto.

But financial deregulation only could have worked in the long run had the government made banks and financial houses responsible for their losses. By increasing the various government-led financial backstops as deregulation occurred, Congress almost guaranteed more reckless behavior, and no one should be surprised at what happened.

Unfortunately, these tidbits of truth are left out in Paul Krugman's own zombie version of economic history. That this rewriting of history comes on the editorial pages of the New York Times should shock no one. After all, the "Newspaper of Record" has been fabricating the "record" for a long time.

February 16, 2013

William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute. He also is a consultant with American Economic Services. Visit his blog.

Last edited by Alex Linder; February 16th, 2013 at 07:40 AM.
Old February 16th, 2013 #43
Leonard Rouse
Celebrating My Diversity
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For a system whose mandate is to smooth economic cycles and facilitate commerce, it sure does a shitty job of it. But at least these kikes are getting rich not doing it.
Old May 13th, 2013 #44
Alex Linder
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Alex Linder

Stockman on FDR and Fannie May, the origins of federal messing the housing market, and the distortions it led to

The New Deal's True Legacy
Chapter 9 – The Great Deformation – The Corruption of Capitalism in America

Last edited by Alex Linder; May 13th, 2013 at 03:01 PM.
Old August 7th, 2013 #45
Alex Linder
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Alex Linder

Why Are Your Children Buying Houses for Ben Bernanke?

Every now and then I like to look at government numbers and see what they really mean. I ran into this batch several months ago but hadn’t had time to play with them till now. What I found shocked me so badly that I ran them three times on a calculator and once using exponents. As you’ll see below, these are “Oh my God” numbers.

Here are facts:

The average US house sells for about $300,000, and the Federal Reserve is buying $40 Billion dollars’ worth of mortgages per month. (If that sounds like a bunch of numerical gobbledegook to you, please hang on for just a moment.)

The Fed has been very public about this, by the way. They explain that they are purchasing “mortgage-backed securities” (for your safety, of course), and they surround the discussion in financial-speak. But, in the end, they are buying houses, plain and simple. It’s all there, for those who wish to check.

Now, here are those numbers:

$40,000,000,000 per month, divided by $300,000 per house = 133,333 houses per month.

Let’s round that down to 130,000 to account for the various financing fees and transfer taxes.

So, Ben Bernanke is buying 130,000 houses per month. Kind of shocking, no?

That means that since this program began in September of 2012, the Fed has bought 1.43 million houses.

And, by the way, there is no end in sight.

In Fairness to Ben

Now, to be fair, I should clarify that your kids are not really buying all those houses for Ben Bernanke personally – they’re buying them for his bosses – the owners of the Federal Reserve.

You didn’t think the Fed was owned by the government, did you?

Oh, no. It is owned by the big banks. I’d tell you exactly who, except that no one knows exactly who. We know that people own shares of the Fed banks (there are twelve of them in all), but the US government is keeping the details secret.

Think I’m making that up to be flamboyant? Please, check it out for yourself! They admit that “the big banks” own the Fed, but they never say which ones. A list did circulate in the 1930s, but that was the last time.

How Your Children Are Forced to Pay

You may have heard this before, but if not, hang on to something:

The Fed uses dollars to buy bonds from the US Treasury. These dollars, however, do NOT come from their savings. Instead, they come as a check that is “drawn upon itself.” (That quote is from the Fed’s own documents, by the way – a paper called Modern Money Mechanics.)

In other words, the Fed just makes up the money. They are buying all those houses with money they just make up! (But it’s surrounded with very intricate accounting, of course.)

But it also means that your children have to pay off the bonds!

The Fed sells all those bonds to investors – who will, of course, want their money back, with interest.

So, where will the money for paying off those bonds come from? From taxes, of course.

When a government sells a bond, they are selling a right to their tax receipts. And that means your kids will be taxed to pay it all off.

The Fed will keep the houses, of course, but hidden behind paragraphs of confusing financial and accounting terminology.

Bye Bye Home Ownership

Home ownership in America is falling off a cliff, as you can see in this graph:

So, Mr. and Ms. America, get ready to meet your new landlords: Benny and the Banks.

Paul Rosenberg
Old January 14th, 2014 #46
Alex Linder
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Alex Linder

communist hamilton nolan sees a new housing bubble. i'm not kidding about him being a communist. basically the entire staff of Gawker are hard-core leftist ideologues. communists or akin to them. this was made clear in a staff chat published recently, re the detroit bankruptcy
Old May 6th, 2014 #47
Alex Linder
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Alex Linder

Isn’t This Pathetic! Creepy Crony Capitalist Bruce Berkowitz Lurking Behind Save Fannie Mae Coalition

By David Stockman

May 6, 2014

The attached headline from an industry publication called HousingWire sounds par for the course. Naturally you would expect the Washington low-income housing lobbies like the National Black Chamber of Commerce and the liberal activist groups like the National Consumer League and the National Organization for Women to line-up against killing Fannie and Freddie. So they have announced the perennial “new coalition” to fight the good cause—deftly calling it “United For American Home Ownership”(UAH): New housing advocacy group launches to fight GSE reform-Housing activists want to protect Fannie, Freddie

The article then goes on to describe the broad range of support for this new fighting force for homeownership and apple pie. And it trots out a has-been former liberal Senator to add some gravitas to its tired old pitch for taxpayer subsidies for the long running GSE scam that shattered the nation’s housing markets during the last decade:

A partnership of businesses, civil rights organizations and trade associations are launching United for American Homeownership, a coalition dedicated to supporting communities by preserving and strengthening Fannie Mae andFreddie Mac.

“For decades, Fannie Mae and Freddie Mac have been the backbone of a healthy housing market, ensuring affordability and access to the dream of American homeownership,” said former Senator Bob Kerrey, a member of the UAH Board of Directors. “But now Congress is considering legislation that could knock the housing market off track and keep many hardworking families from achieving the American dream of homeownership. Eliminating trusted institutions like Fannie and Freddie is a dangerous idea, and one that United for American Homeownership is prepared to fight all the way.”

The backbone of a healthy housing market, enduring affordability and the American dream?! “Eliminating trusted institutions” like Fannie and Freddie a “dangerous idea”? Has this man no shame?

Indeed, did former Senator Robert Kerrey, who left Capitol Hill way back in 2001, retire to a hog farm in Nebraska and loose track of the last 13 years? Well, no, he spent the next 9 years as President of the iconic “New School” located in Greenwich Village, NYC.

Presumably some of the 9,000 students there might have brought his attention to the fiasco that finally materialized in the summer of 2008. That’s when Secretary Paulson claimed to have a bazooka in his pocket that would save Fannie and Freddie—only to panic a few weeks latter and put Uncle Sam on the line for the entire $6 trillion mess that had accumulated over decades under the very same guise of “promoting the American dream of homeownership”.

Never mind, however. A couple of lines from Kerrey’s Wiki page provides an update on what he’s really been up to since his New School gig:

In May 2010, he was selected to become the head of the Motion Picture Association of America,[2] but he and the MPAA could not reach an agreement,[3]

In 2012, Kerrey sought election to his old Senate seat to succeed retiring Democratic incumbent Ben Nelson.[4] He lost to Republican nominee Deb Fischer.

In 2013, Kerry joined the Carmen Group lobbying firm.[5]

So there you have it. A decade in the hot-bed of progressive academia, a foiled trip through Hollywood and a failed comeback in Nebraska. What does a politico lifer do next? Why he goes full retard crony capitalist and becomes a lobbyist.

But here’s the stinky part. At the very bottom of the HousingWire story you can find out who’s the bankroll behind the new UAH coalition. Why it’s none other than Bruce Berkowitz the hedge fund brat who thinks the American people owe him an opulent living. He’s the leader of the fast money pack that has had the temerity to buy up worthless Fannie and Freddie preferred stock at cents on the dollar and is now demanding that Congress “reform” these agencies—so that their “investments” will be worth par and generate billions in ill-gotten gains.

The broad coalition behind UAH consists of: The National Black Chamber of Commerce, RetireSafe, National Consumer League, National Organization for Women, Fair Housing Advocates Association and Fairholme.

So that’s why a has-been Senator becomes a lobbyist in his golden years. Namely, to link up Wall Street plunder with Washington mendacity. Ask no more why money rules the beltway and why America is becoming a crony capitalist dystopia.
Old October 17th, 2014 #48
Alex Linder
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Alex Linder

HUD pushing to inject more people of failure into white areas
Old October 17th, 2014 #49
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The Chinese are buying up 40% of all the million-dollar plus homes, in the East Seattle area. The first thing they ask their realtor is, "Where does Bill Gates live?"
Ever notice how Lesbian Mayors in Seattle and Chicago, advocate the castration of police officers?
De-funding police and empowering Negroes will end badly. Very badly.


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