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The Financial System is Destroying the World Economy

Discussions about the economic and financial ramifications of PEAK OIL

Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Mon 09 Jul 2018, 20:54:20

GHung wrote:Rentals. A friend of mine bought several homes out of foreclosure after the crash and now complains about the trials and tribulations of being a landlord. Go figure.

Good point. AFTER the housing crash, lo and behold, a lot of Americans decided that owning a home is risky, so they preferred to rent! (Kind of reminds me how after a stock market crash a significant percentage of investors want no part of stocks, being reminded that prices can go down).
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Mon 09 Jul 2018, 21:13:36

KaiserJeep wrote: "Real" inflation is actually around 8% to 11% per year in US$. This compounds rapidly when you do the math.

No citations, I see.

Well, IF inflation were in the ballpark of 9 or 10 percent, then that would compound rapidly. But it's not even close to that in the US, overall.

...

What are you measuring? College education and medical care costs? Well, those have significant inflation.

Overall prices? Accept for the conspiracy theorists like Shadowstats and peoples' intuition (people who tend to ignore that some prices fall and MANY prices don't rise rapidly), not so much.

Eyeballing a Shadowstats chart, they claim US inflation since 1982 has averaged about 9% a year. (Right in your stated range).

http://www.shadowstats.com/alternate_da ... ion-charts

So by the rule of 72, prices would double every 8 years. So that would be 4.5 doublings in prices in the US since 1982.

But the thing is, 4.5 doublings would mean prices were up over 20-fold since 1982. That's so far off for anything but College and Medical care, it's laughable.

I look around at the real world and for things like rents, clothes, food, housing, cars, gasoline, crude oil,natural gas, electronics, etc. 2 doublings, resulting in prices 4 times as high, is still quite a bit too high. And that's consistent with US inflation calculators on the net, which says prices are up about 161%.

Emotion isn't a good thing to make longer term economic measurements with. It's one of the way the financial Cassandras get their terrible track record.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Mon 09 Jul 2018, 21:18:47

If you look at a chart of ownership rates/ home price, there are bumps before both the S&L (neg amortization) and subprime crashes. That doesn't indicate some weird increase in demand, it indicates banks a running a scam.

But not just "banks"; brokers, appraisers, agents, inspectors, insurance cos, the whole system knew it was a scam. Hell, I knew it was. I felt terrible selling to that nice young couple for almost 3x what I'd paid a few years previously.
But I did it anyway.

...
Just looked it up, it's still $100k underwater

.
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Mon 09 Jul 2018, 21:28:30

Pops wrote:If you look at a chart of ownership rates/ home price, there are bumps before both the S&L (neg amortization) and subprime crashes. That doesn't indicate some weird increase in demand, it indicates banks a running a scam.

But not just "banks"; brokers, appraisers, agents, inspectors, insurance cos, the whole system knew it was a scam. Hell, I knew it was. I felt terrible selling to that nice young couple for almost 3x what I'd paid a few years previously.
But I did it anyway.

...
Just looked it up, it's still $100k underwater

.

Ok. (I'm trying to understand what you believe here).

So are the rapid price rises for housing in big cities around the world part of the banking "scam", or is that something else?

To me, although clearly there was dishonesty and greed in a hot real estate market (like tends to occur in ALL hot markets, over time), that doesn't put banks at the center of what was happening re prices.

I still put supply, demand, perception, and greed (and greed from homebuyers, not the banks) as major components when prices rocketed upward. And lack of demand (due to weak economies), perception, and fear as major components when the prices plummeted.

...

So I think where you see banks as the puppetmaster pulling all (or the vast majority of) the strings, I see the banks as a big, powerful player, but only holding a relative handful of the strings. And considering it's government that gives them their power and regulates them, I have to blame government for enabling a lot of the dishonesty.

...

And I don't see why you should feel bad for selling your house for its market price to a willing buyer -- as long as you weren't misrepresenting anything material, that is. (Do you feel bad for selling a stock which appreciated a lot as news changed? I don't.)
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Mon 09 Jul 2018, 23:06:15

I believe that "finance" is sucking the life out of the economy, transferring wealth from the peasants to the wizards.

Prices only rise as far as banks allow, at least traditionally when they actually loaned from their deposits. There is not any widespread shortage of housing, in fact supply looks higher than it was through the 10 years preceding the "taxi driver" scramble. this is months supply

Image


Notice the rise in the dashed red line on this sector chart of GDP share: finance.

Image
click 4 bigger

"Finance" is the largest sector of the economy, by far. It is 25% of the entire economy, up from 10% back when America was Great. Now look around you, how much "finance" do you see? Aren't you thankful for all that "finance"?

Now look at this:

Image

Here is how this particular scam plays out, notice the rocketing debt of "financials" and then Boom, after the wizards' sheets get yanked ... aa buttload is magically assumed by .gov which also doles out a good chunk to puff up bank balance sheets not to mention billions in zero effective rate loans to regular corporate persons (not corporeal persons mind you). ... again, not a whole lot of sugar for the working stiff, greedy bugger that he is.


(and greed from homebuyers, not the banks)


LOL. So people were greedy in the 80s when they bought the pitch not to worry about negative amortization loans because the price of their house was rising so fast the refi would be a cakewalk?
Ditto in the 00s when the next generation of cons said the exact same thing to the next generation of people they knew would default when the rate reset?

I'm thinkin you're blaming the victim.
If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
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Re: The Financial System is Destroying the World Economy

Unread postby KaiserJeep » Mon 09 Jul 2018, 23:18:25

I have the traditional view that inflation happens mainly when governments first print money, then spend it. The money supply when diluited like that, is the very definition of inflation. I also don't care for the term "Quantitative Easing", I prefer the blunter term "printing money".

10% per year is your target to simply tread water. Always remember that.
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Re: The Financial System is Destroying the World Economy

Unread postby The_Toecutter » Tue 10 Jul 2018, 00:38:09

Here's a more accurate way to gauge the real rate of inflation:

http://chapwoodindex.org/

Check the prices of goods and services that people actually use year over year. 10% year over year sounds about right over the last few years. I've definitely noticed it in the grocery store and in the cost of rent. It was a few percentage points less than 10% year over year prior to 2008, but was still undoubtedly a number significantly higher than the CPI through the 90s and 00s.
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Re: The Financial System is Destroying the World Economy

Unread postby onlooker » Tue 10 Jul 2018, 02:49:30

"I believe that "finance" is sucking the life out of the economy, transferring wealth from the peasants to the wizards."
The proof if ever they're was one, is the bail out of the Banks in 08 to the tune of $Billions of taxpayer money. And yet over decades important infrastructure of this county is being financially neglected!
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Tue 10 Jul 2018, 08:09:36

A person on a life raft without water or hope of immediate rescue would much rather have 10 pounds of water than 10 pounds of gold. This is because of Resource Depletion. That’s when you know the true value of something.

In the meantime they can put all the digits they want on a hard drive, that creates digits on a hard drive, not wealth. If you are playing Monopoly and one player goes out and buys more Monopoly money and brings it to the game then he has an advantage WITHIN THE GAME. But fundamentally it’s still a game. It doesn’t matter in life.

Here is the test, in 2008/2009 trillions of dollars were lost. How many folks starved to death because of that loss? Zero or damn near.

Look at the loss claims in the Bernie Maddoff case. They are all over the place. Some folks invested $10 million. Bernie told them they made $90 million, complete lie, he just printed some extra zeros on paper. Folks claimed they lost $100 million dollars. No, they lost $10 million, the other $90 million never existed. It was just extra computer zeros.

That’s our whole economy, all fake money. Now if you can lay your hands on some fake money and buy something of intrinsic and tangible value, then you have converted a fantasy into a reality. But you have snookered someone out of a real asset for a seat at the Monopoly table. Good for you.

Of course few of us have even fake money to convert. We need what we have to buy scarse resources.
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Re: The Financial System is Destroying the World Economy

Unread postby marmico » Tue 10 Jul 2018, 08:58:02

Notice the rise in the dashed red line on this sector chart of GDP share: finance.


Notice the rise in the solid red line on that sector chart of GDP share: professional and business services.

Since 1929 the former doubled and the latter tripled as a share of GDP. The professional and business services sector not the finance, insurance, real estate, rental, and leasing sector is destroying the world economy. LOL.

The finance and insurance subsector has grown from 4% of GDP value added in 1929 to 7.5% in 2017. The bulk of the increase is in the real estate and rental and leasing subsector.
Last edited by marmico on Tue 10 Jul 2018, 09:10:11, edited 1 time in total.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Tue 10 Jul 2018, 09:05:14

Back before the crash I quoted shadowstats a lot, the market was way distorted for a minute there and his rates looked plausible from the bunker. But I'm pretty sure that his current '80s alternate chart at 10% plus is way high. The finance industry works hard to make money in any way, legal or not, I'm pretty sure they aren't planning to lose money on day one making 4% mortgages.

But... I think inflation is out there, and low interest rates mean the main tool to fight them is broke.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Tue 10 Jul 2018, 09:11:53

marmico wrote:Notice the rise in the solid red line on that sector chart of GDP share: professional and business services.

No doubt, call it the Airball index, LOL
That is the meritocracy, the Elites we've all heard so much about.
Oh crap, I'm arguing the MAGA case!
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Re: The Financial System is Destroying the World Economy

Unread postby marmico » Tue 10 Jul 2018, 10:51:35

Back before the crash I quoted shadowstats a lot, the market was way distorted for a minute there and his rates looked plausible from the bunker.


Really. How deep was your bunker? ShadowStats Williams is a nutter. Households did not lose 75% of their purchasing power between 1985 and 2014, which is the gray dotted line on Doug Short's chart.

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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Tue 10 Jul 2018, 11:07:12

Pops wrote:I'm thinkin you're blaming the victim.

So liar loans (where the applicant lies on the application to get a loan they don't qualify for) are all the banks' fault?

So people have NO personal responsibility re their finances?

I'm not saying the banks' hands are completely clean. But I think saying all the homeowners were pure "victims" is pure liberal fiction -- re evil corporations are the only bad thing in the world -- government and individuals are exempt from any blame for bad behavior.

I'm a moderate, but on the issue of personal responsibility I come down squarely in the right wing camp.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Tue 10 Jul 2018, 12:02:51

marmico wrote: How deep was your bunker?

Sounds like a bluegrass ballad.

My doom was directly proportional to everyone else's euphoria if that is an indication.
If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Tue 10 Jul 2018, 12:27:06

Outcast_Searcher wrote:
Pops wrote:I'm thinkin you're blaming the victim.

So liar loans (where the applicant lies on the application to get a loan they don't qualify for) are all the banks' fault?

So people have NO personal responsibility re their finances?

I'm not saying the banks' hands are completely clean. But I think saying all the homeowners were pure "victims" is pure liberal fiction -- re evil corporations are the only bad thing in the world -- government and individuals are exempt from any blame for bad behavior.

I'm a moderate, but on the issue of personal responsibility I come down squarely in the right wing camp.

I've bought and sold 8 or 9 houses, not a huge amount but some. Prior to the 00s I was always concerned about making the "ratios": total payments to income and housing costs to income. My last 2 loans in the 00s I don't remember it being even mentioned, the last lender didn't even ask for verification of income, that was several years even before the crazy. Again just antidotally but a employee of mine got a loan and looked at me funny when he said it was "stated income" and wouldn't be verified. Late a nephew submitted an application and when it came back approved the loan broker had actually increased his stated income on the app!

What had changed? The originators were not keeping the paper, they were selling down the line to be sausaged and sold to the greater fool. Of course some people took advantage and some not very sophisticated others simply bought the con, but that isn't my point. Point is the scheme - it was a scheme to bury sub prime loans - crashed the economy — and I'm not totally convinced it won't eventually lead to a worse recession behind the trillions in central bank debt.
Did some people think they had discovered the golden goose? Of course,
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Tue 10 Jul 2018, 12:33:44

Outcast_Searcher wrote:So liar loans (where the applicant lies on the application to get a loan they don't qualify for) are all the banks' fault?

Yes.
Just to repeat, all my loans prior to the 00s they actually confirmed the info on my app because it was a stand alone paper, it might be bought or packaged but it was still an individual transation. After the 00s, the brokers only interest was in the origination fee, they couldn't care less about whether you were qualified or not because the loan would become indistinguishable in the "tranch"... and be insured by AIG to boot.
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Tue 10 Jul 2018, 13:41:11

Pops wrote:
Outcast_Searcher wrote:So liar loans (where the applicant lies on the application to get a loan they don't qualify for) are all the banks' fault?

Yes.
Just to repeat, all my loans prior to the 00s they actually confirmed the info on my app because it was a stand alone paper, it might be bought or packaged but it was still an individual transation. After the 00s, the brokers only interest was in the origination fee, they couldn't care less about whether you were qualified or not because the loan would become indistinguishable in the "tranch"... and be insured by AIG to boot.

OK. That's fine. In my world, personal responsibility is "a thing", but I understand that people differ on that idea.

A bank might be able to catch some lies, but not all lies. Otherwise, why even require paperwork, signatures attesting to the truth of the paperwork, etc?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Hawkcreek » Tue 10 Jul 2018, 14:39:58

Outcast_Searcher wrote:OK. That's fine. In my world, personal responsibility is "a thing", but I understand that people differ on that idea.

Perhaps more people are starting to model their personal responsibility in the same way that corporate "citizens" do it.
Anything you can do that adds to your bottom line is requirement, not a choice. The "board" requires it, and the hell with civic responsibility, or strict adherence to custom or law. It is not what you can justify, its what you can get away with. A corporation has no conscience, and they seem to do better every year. If you can buy a company on credit, strip its assets, and then go bankrupt, you are applauded and rewarded.
It works well for corporations, so it should be good for the ordinary, non-corporate citizens too.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Tue 10 Jul 2018, 14:48:33

Outcast_Searcher wrote:OK. That's fine. In my world, personal responsibility is "a thing", but I understand that people differ on that idea.

A bank might be able to catch some lies, but not all lies. Otherwise, why even require paperwork, signatures attesting to the truth of the paperwork, etc?

You're missing my point, could be your imagined moral superiority? Not sure.
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