Bacon's Rebellion

Democracy Thrives in Sunlight

Haven’t We Seen this Show Before?

—

by

James A. Bacon
in , ,

Item One

, from WSJ article, “Bernanke Affirms Bond Buying” (my emphasis):

“Federal Reserve Chairman Ben Bernanke came down firmly in favor of continuing the central bank’s bond-buying programs, even as he acknowledged concerns that the efforts might encourage risk-taking that could someday destabilize markets or the economy.”

Item Two, from WSJ article, “Builders Fuel Home Sale Rise” (my emphasis):

“Home builders … have hosted free credit-counseling sessions for buyers with bad credit scores, and made heavy use of government-backed mortgage programs that allow buyers to get a home with little or no down payment.”

The latter article then described the home-buying quest of Lynda Riley and her husband in Stafford County. With past credit problems, including a 2008 bankruptcy filing, the couple figured they could spend between $200,000 and $250,000 for a house. They ended up paying twice as much. A relative assisted with a $12,000 gift to help with the down payment on the $426,000 transaction, while the home builder chipped in with $5,000 in closing cost assistance.

Said Ms. Riley, a 41-year-old mother of two who works with disabled children in Alexandria: “The builder’s whole attitude was, ‘No worries.’ They help you and they trust you. They really, really want you to get approved.”

Bacon’s bottom line: Apparently, the Federal Reserve Board, federal agencies and the American people have learned abso-friggin-lutely nothing from the devastating experience of the easy money-fueled housing boom and bust of the 2000s. Here we go again, shoveling money to home buyers with lousy credit. In return for a fleeting lift to the home building sector and a transitory boost to the Gross National Product, we’re setting ourselves up for another fall. It won’t be a perfect re-run of the 2007-2008 crash — the banks are not as over-leveraged today as they were then — but it’s all soooo unnecessary. And we don’t know what other credit-fueled bubbles are lurking out there.

We have become a nation of short-term thinkers addicted to short-term fixes. We’ll do anything to avoid even momentary economic discomfort, even if it means greater pain down the road. The people have the government they want, and the government is giving them what they want, as the H.L. Mencken saying goes, good and hard.

Boomergeddon is coming, baby. It’s coming sooner than you think.

— JAB

Share this article

ADVERTISEMENT

(comments below)

ADVERTISEMENT

(comments below)

Comments

23 responses to “Haven’t We Seen this Show Before?”

  1. larryg Avatar
    larryg

    what the ding dong does Bernanke have to do with mortgage loans?

    I’d be curious to know the details here. Is this an FDIC bank, for instance?

    you know the funny thing here… the people who make the mortgage loan and the builder are probably Republicans.. who are complaining about ObamaCare and Regulations – all the while they are participating themselves in this unsavory scheme to sell something to someone who can’t afford it.

    Do you think the same people would also engage in the same practices even if the govt was not involved?

    you bet they would. Payday loans and predatory mortgage loan practices are in the same church – just different pews.

    off the deep end again here… where was the hand-wringing when a Republican appointed Bernanke to his position? Remember also, Bernanke does not make these decisions himself – there is a board than makes them via a majority vote.. right?

    over and over – folks on the right – seek to personally DEMONIZE specific individuals… these days… I call that worse than short-term thinking. It’s not Bernanke’s policies… it’s the Fed Board policies.

    how about providing a full list of the “offenders” ?

    1. James A. Bacon Avatar
      James A. Bacon

      Larry said, “You know the funny thing here… the people who make the mortgage loan and the builder are probably Republicans.”

      Really? Do you have any factual basis *whatsoever* to make a claim like that? And even if it’s true, so what? Home builders are in the business of selling houses. They use whatever legal tools are at hand. Asking them to behave otherwise is asking to change human nature. The key question is what are the rules they must abide by?

      Goosing the housing economy by near-zero interest rates and near-zero lending standards are policies of the Fed and the FHA. They make the rules.

      To state that is not to demonize anyone. It’s stating a fact.

      But when it comes to demonizing people, Larry, you take the cake. How about this statement: Those horrible, hypocritical Republican home builders complaining about regulations and Obamacare are “all the while participating themselves in this unsavory scheme to sell something to someone who can’t afford it.”

      Not only are you the one doing the demonizing, you do so with no factual basis whatsoever. What’s it like living in LarryWorld?

      1. larryg Avatar
        larryg

        demonizing individual people… guy

        I did not demonize the builders.. I stated what is likely a fact as most homebuilder lobby groups are Republican in nature and lobby against regulation…

        that’s fair.

  2. James A. Bacon Avatar
    James A. Bacon

    Meanwhile, LarryG also misses the thrust of the post — that Americans are engaging in the same behavior that got them in trouble 10 years ago. We have learned nothing.

    Now, having read LarryG’s response, we know why. People are in total, utter denial. They deflect uncomfortable information with accusations that the information is partisan, which means that it can’t possibly be right, which means it can be safely ignored.

    1. larryg Avatar
      larryg

      13 years ago – we had a balanced budget.

      I’m not in denial. We’re in a heap of doo doo… no question about it

      but the extreme dialogue is leading to extreme proposals and they’re
      not only not going to fly – they’re damaging the GOP brand which in the end is a VERY BAD thing because we do need a countervailing force to the tax&spend folks.

      1. James A. Bacon Avatar
        James A. Bacon

        I’m really not concerned about the GOP brand. I’m concerned about what happens to the people of the United States when the fiscal wheels all off the bus.

        Speaking of the GOP brand… What has Bob McDonnell done to the brand with his transportation tax increase and accepting the Medicaid expansion. Is he one of your extremists?

        1. larryg Avatar
          larryg

          re: the GOP brand – in the toilet and becoming less and less relevant in real issues.

          re: McD – “extremism”

          that’s an interesting question… a challenge!

          so a question back at you – do you think the GOP considers McD an (choose one): 1. extremist 2. RINO 3. Liberal ???

          okay..you can pick all 3 if you wish.

          me? I think what McD did is an example of what happens when the GOP is guided by extremist ideas and real solutions are needed… at some point even members of their own rank step forward …do the ugly deed – and get sentence to political hell… and go on their way…

          in the end -you have to ask yourself – is this a better solution than what we would have had if the GOP had previously actually tried to compromise with the Dems over transpo funding rather than demonizing them ?

          What we got – is, in my view, an example of what happens when the GOP is running amok… on extremist views…

  3. DJRippert Avatar
    DJRippert

    Jim:

    You are an alarmist. Dear Leader won’t allow a repeat of 2008. Under Dear Leader’s guidance the banks are small, community based institutions. None are “too big to fail”.

    1. larryg Avatar
      larryg

      more than an alarmist. “dear leader” cannot spend a dime without Congress and he cannot cut a dime without Congress.

      Please note – that FDIC banks do not have this problem for the most part and that includes the FDIC banks that were actually subject to CRA regs.

      What “dear leader” proposed was to extend FDIC-like regs to the bigger banks engaging in these risky mortgage practices and guess who lined up against that idea?

      The GOP did, of course… nevemind that FDIC has an excellent record of keeping most banks from engaging in bad practices …. parts of the GOP would repeal FDIC itself in the name of a more “open market”.

    2. James A. Bacon Avatar
      James A. Bacon

      The situation is ironic, isn’t it?

      1. DJRippert Avatar
        DJRippert

        It really is. I guess the new liberal talking points are basically, “blame Congress”. Seems that “blame Bush” isn’t selling anymore.

        Last time, I got out of the market without getting killed. However, I didn’t have the guts to go heavily short. This time I won’t let that opportunity pass. The artificially low interest rates are creating another bubble. The banks are bigger than ever. The government has less borrowing power since it has already borrowed much of the wealth in the world.

        What’s a poor boy to do?

        I am thinking food. Farmable land. When Boomergeddon comes and the fit hits the shan I think you have to go to the lowest common denominator. I don’t know what will be valuable but I know that people will trade it for food.

        Farmland is better than gold, I think. And not some farming REIT that has to trade on an exchange yielding potentially worthless dollars. No. Actual farms.

        Worst case, Boomergeddon never comes and you own a few thousand acres of farmland. People still have to eat and the farmland ought to hold its value without an economic collapse.

        I especially like Northampton and Accomack counties in Virginia and Somerset County, MD. Straight forward aquaculture potential to go with the farms.

        1. James A. Bacon Avatar
          James A. Bacon

          I find farmland attractive, too. It doesn’t hurt that farming is one thing at which Americans are very good — world class, even. On the other hand, I’ve heard that Midwestern farmland is already in a speculative bubble. Don’t know if that applies to the Eastern Shore or not.

          1. DJRippert Avatar
            DJRippert

            I “guesstimate” about 4 acres of farmland per person fed. Here’s 82 acres of land for $95,000 in Somerset County. I have no idea of the land is cleared or farmable. I am betting that I could “carve out” 40 acres for the ten people in my extended family. Just a thought.

            http://www.landwatch.com/Somerset-County-Maryland-Land-for-sale/pid/219505856

          2. DJRippert Avatar
            DJRippert

            This is $5,700 per acre up the road in Talbot County. Maybe bid $4,750 per acre?

            http://www.bensonandmangold.com/idx/mls-ta7821918-barber_rd_trappe_md_21673

          3. DJRippert Avatar
            DJRippert

            I love this property in Belle Haven, Va. Just over $10,000 per acre (asking) with water front and a renovated farm house.

            Cash in the 401(k), borrow at a fixed rate now, buy a bunch of guns and ammo and lay low until Boomergeddon hits.

            http://www.blueheronva.com/property.php?propid=1193

          4. larryg Avatar
            larryg

            re: laying low until boomergeddon hits.

            why wait? just move to any of a wide variety of 3rd world countries and get some good practice for even cheaper land prices!

            or here… some middle ground:

            ” 10 Most Suitable Countries for American Expatriates”

            http://www.expatify.com/advice/10-most-suitable-countries-for-american-expatriates.html

            or does Jim think all these countries are going to blow up also?

            the whole concept of boomergeddon as well as all the gun-clinging survivalism is silly.

            the internet is driving much of it much like a herd.

            used to be guys on boxes in the parks… or skinheads gathering in store fronts trading stories on how to build bunkers… and the like ….

            but now we have them all “connected” which is truly ironic if you think about it because if they are right – there won’t be an internet anymore, eh? They’ll all just be hunkered down, every day, inventorying their food and bullets and spending time building more barricades and the like for the inevitable time when the roving bands of muslim and black/brown marauders come for them to get their stuff and steal their women and chickens and gold bars that they were thoughtful enough to convert their 401K to before going into burrow mode.

            There’s a blog I enjoy (perhaps not exactly the right word) – called The Field Lab. It’s about a guy that was a photographer in the Northeast … sold his house and bought land in the Texas desert to live off the grid and grow his own food. Google it.. He has no grid electricity but he has internet – go figure.

        2. larryg Avatar
          larryg

          time to take those farm subsidies away, eh?

          DJ might be on to something but I’m just point out that most of counties like Spotsylvania is “farmland”…. fallow farmland…

          Maybe DJ is thinking about Hobby Farms as investments in Facquier, eh?

  4. larryg Avatar
    larryg

    “Fed Chair Ben Bernanke does have one of the best inflation records since WWII”

    ” From CNBC about Ben Bernanke’s testimony yesterday before the Senate banking committee: “In criticizing the central bank’s easy monetary policy, Sen. Bob Corker, a Republican from Tennessee, called Bernanke the biggest dove since World War II. Bernanke was quick to push back. “You called me a dove, well maybe in some respects I am, but on the other hand my inflation record is the best of any Federal Reserve chairman in the postwar period – or at least one of the best,” he said, citing the 2 percent average inflation rate.”

    1. DJRippert Avatar
      DJRippert

      Recessions cure inflation.

  5. Peter Galuszka Avatar
    Peter Galuszka

    My recurring problem with blog postings like this is their elitism. It is as if a rich and entitled person is raging about his social lessers planning to buy real estate that he assumes they cannot afford. “Boomergeddon” had the same problem in that it by assuming that the lower and middle classes automatically go on a spending binge the moment they get a MasterCard, which is just plain nonsense.

    There are good points about not using a house as an ATM machine but the classism is a bit off-putting.

    1. DJRippert Avatar
      DJRippert

      Supply and demand set price. The price of money is the interest rate. When the Fed goes into endless quantitative easing the supply of money is artificially increased. That artificially drops the price (interest rate). Cheap money encourages over-consumption. The over consumption occurs across the board. Tesla’s sales grew more than 500% from Q3 to Q4 of 2012.

      While there is no sign of an easy money fueled bubble at the moment, these things come on fast. When that happens, relatively wealthy over-extended people see their net worth dip. Less wealthy over-extended people go bankrupt.

      This is less about classism and more about the basic math of personal balance sheets.

  6. reed fawell III Avatar
    reed fawell III

    Larry opines: ““dear leader” cannot spend a dime without Congress and he cannot cut a dime without Congress.”

    Hey, Congress hasn’t passed a budget in FOUR YEARS. Why? Cause Larry’s good friend Harry Reid won’t allow it.

    And it’s all the GOP’s fault!?

  7. larryg Avatar
    larryg

    Reed my man. Do you know what a CR – a Continuing Resolution is?

    do you realize that a solid majority of Republicans has voted to continue spending at the same deficit levels for 3 years?

    http://www.redstate.com/2012/09/14/only-70-republicans-vote-against-disastrous-cr/

    what say you Reed? do you think the GOP should have stood on their principles and not vote to continue deficit spending?

Leave a Reply

Read More