We'd tax any property we already tax, but we'd simply increase the ammount. cars/planes/houses/land/boats/etc...

To be honest i have no clue how you'd collect it, though. If it would be a local thing that gets forwarded to the feds or if the feds just come in and take a look at everything. Either way, its probably easier for an IRS agent to come in and look at a boat than try to track down numbered offshore accounts. You already register your house, your car, your plane, your boat, etc... with some government agency, so they've already got most of the info they need.

Property taxes would potentially discourage people who right now cant afford/or are on the edge of affording property. This isn't a bad thing. That shit fucked us right good. It would probably encourage renting, and people are going to want to rent in the best place possible. It might even encourage more urban growth instead of sprawl. You end up with alot of people renting property (now with more disposable income because they have no income tax) in urban centers, spending locally, and encouraging local growth. If local governments in urban centers weren't worse than the feds, you might even see increased local tax revenue go to helping the poor.

Urban centers would get the better schools and people out in the suburbs could still enjoy that lifestyle, they'd just have to work a little harder to educate their kids (which they do already).

This is all theoretical and i have no idea if it would work or not, but unless im missing something it seems like a better way to go. Taxing established, physical wealth is much more progressive than income tax.

2/22/2010 10:50:01 AM

I could tentatively agree with that.

There's got to be a downside, though.

Quote :

"If it would be a local thing that gets forwarded to the feds or if the feds just come in and take a look at everything."

I wouldn't want to give local governments power over all federal revenues. That would be downright zany. And having the federal government tracking all property seems almost as difficult as tracking income.

2/22/2010 11:09:09 AM

Realistically the problems with tracking property are all going to be due to incompetence in the bureaucracy. IDK about NC, but the state of maine has absolutely no problem getting all vehicles registered and paying fees every year. Cops pulled me over once when my registration was expired. They want their money. As long as the database Maine uses for registrations is the same as other states, or even if its not the same, but contains the same data it wouldn't be hard for the fed to use it if they aren't retarded.

Its an entirely different story to have the fed try to figure out how someone has moved money around in offshore accounts they have no access to. Or to track someone laundering money through some organization.

Property exists, theres a bill of sale on it, its registered already with someone, sales tax was probably paid on it, its just a metter of collecting the data and processing it.

re: local governments with power of revenue, I agree it might cause problems and probably wouldn't be the best way to do it. But the fed could balance it out by reducing the ammount of money they hand out to the state. Not ideal though.

2/22/2010 11:18:03 AM

Quote :

"Property values are currently inflated way over where they should be thanks to piss poor management of the fed."

Most economists would still argue that they are undervalued due to the market overshooting back.

Quote :

"Anyone who overpaid will still be paying the same relative ammount in property taxes that they paid in income, the only difference is over time their property will decrease in value until someone is willing to buy it."

Really you would just be artificially depressing home values below thier market price.

Quote :

"Property taxes are by far the most progressive, this is not a sales tax, nor does it have to be a flat tax. Poor people who dont pay income taxes now dont own property of any taxable value."

I don't think you understand the concept of regressive and progressive taxation. It's not just "poor people don't pay taxes". Its the way the system is set up. If someone with $1million paya larger percentage of thier income than someone with $2million, it's still regressive. You would just be pushing the tax burden off of the rich onto the middle class.

Quote :

"We'd tax any property we already tax, but we'd simply increase the ammount. cars/planes/houses/land/boats/etc... "

Then this is really just a "boat/car/land/house" tax, considering there are far more types of property that you would not be taxing.

Quote :

"It would probably encourage renting"

It would discourage that as well, I don't somehow get out of paying property tax on my property if I'm letting someone rent it. What it would encourage is homelessness, or at least dependence on public housing.

Quote :

"This is all theoretical and i have no idea if it would work or not, but unless im missing something it seems like a better way to go."

No offense, but it's a terrible idea. You would need to tax every kind of property, for example stocks/bonds/small businesses, etc. This would cause an unneccesary contraction in the market as the value of capital would be artificially high, everyone would want to have cash.

2/22/2010 11:44:43 AM

Quote :

"Really you would just be artificially depressing home values below thier market price."

How so? For most home owners, the total ammount of taxes they pay wont change. It would just shift from income to property. If a house is actually worth what someone paid for it, the value wont change. And if the value does change, they pay less in taxes. Thats not a problem.

Quote :

"I don't think you understand the concept of regressive and progressive taxation. It's not just "poor people don't pay taxes". Its the way the system is set up. If someone with $1million paya larger percentage of thier income than someone with $2million, it's still regressive. You would just be pushing the tax burden off of the rich onto the middle class."

Right now the rich pay less by a percentage than others, as evidenced by this thread. The point of the property tax is to get at what the rich spend their money on. The majority of property owners wouldn't notice a change in their net taxation, only the wealthy would see an increase because they simply own more stuff. The goal is to make people like Warren Buffet, who makes a living off investment returns, pay a share of his established wealth instead of income.

Quote :

"Then this is really just a "boat/car/land/house" tax, considering there are far more types of property that you would not be taxing."

No where did i say that was the strict and unchangable list of everything that would be taxed.

Quote :

"It would discourage that as well, I don't somehow get out of paying property tax on my property if I'm letting someone rent it. What it would encourage is homelessness, or at least dependence on public housing."

People who rent out buildings may see an increase in overall taxes depending on how much they own, but its not going to suddenly make it unprofitable. Even if they pass the increase down to renters, those renters are going to see an income boost from a lack of income taxes.

Quote :

" No offense, but it's a terrible idea. You would need to tax every kind of property, for example stocks/bonds/small businesses, etc. This would cause an unneccesary contraction in the market as the value of capital would be artificially high, everyone would want to have cash."

Stocks and bonds wouldn't be directly taxed. The capital that the buy might, and if someone cashes out and uses the funds to buy property, than that property will be taxed. No one would want cash because cash doesn't generate interest. Everyone would be investing because there is no direct tax on the investment, only what it buys.

2/22/2010 12:14:00 PM

Quote :

"If a house is actually worth what someone paid for it, the value wont change."

You would be artificially increasing price, which reduces demand. Less people can afford to buy houses, thus their price goes down. People owning houses get screwed.

Quote :

"Right now the rich pay less by a percentage than others, as evidenced by this thread."

Maybe for a few rich people because of the market going down, but for the vast majority of people, increase in income is directly correlated to an increase in tax rate.

Quote :

"The point of the property tax is to get at what the rich spend their money on."

And you're approaching it the wrong way, as income increases marginal propensity to consume goes down, meaning you spend less and less of each additional dollar you make (over autonomous consumption). This is a similar problem with a sales tax, I can explain that in the fairtax thread if you like.

Quote :

"The goal is to make people like Warren Buffet, who makes a living off investment returns, pay a share of his established wealth instead of income. "

Let me try and illustrate this with an example, warren buffet might have a few million in what you consider to be taxable properties, and while this seems like a lot compared to the average person's few thousand, the average person has a larger percentage of thier money tied up in that type of property, thus they pay higher taxes.

Quote :

"No where did i say that was the strict and unchangable list of everything that would be taxed. "

If you want to get any where near the amount of money neccesary to replace income taxes, you will need to tax capital.

Quote :

"Even if they pass the increase down to renters, those renters are going to see an income boost from a lack of income taxes."

Hey will pass it down to renters, it's not possible for them not to. Renters will pay the same kinds of taxes as homeowners, you're basically just putting a huge tax on having a roof over your head, which would mainly hurt the poor, sick, and elderly, people who avoid the higher tax burden through an income tax system.

Quote :

"Stocks and bonds wouldn't be directly taxed. The capital that the buy might"

Those two statements contradict each other. If you own BofA stock, you own part of thier company, including any buildings they own, etc. You'd get taxed, just indirectly. I can get into the specifics in more detail if you want, but I can simply say that your system would discourage investing capital, which is bad for our economy.

2/22/2010 1:16:26 PM

Quote :

"Most economists would still argue that they are undervalued due to the market overshooting back."

Which ones? I'll be mildly impressed if you can find even one and I'll eat your shoe if you can somehow back up the "most" part of your statement.

2/22/2010 5:02:01 PM

http://money.cnn.com/2010/01/27/real_estate/most_overvalued_metro_areas/

Quote :

""I've done some research that shows when you get a bubble, you don't just return to normalcy," he added. "You go past normalcy for a long period of undervaluation.""

Please post an address I can mail my shoe to and a preference of right or left foot.

2/22/2010 5:39:15 PM

Come on dude, that really doesn't pass the smell test. Your first hint that something is amiss is who commissioned the study

Quote :

"The PNC Financial Services Group, Inc or PNC was incorporated under the laws of the Commonwealth of Pennsylvania in 1983 with the consolidation of Pittsburgh National Corporation and Provident National Corporation. Prior to the National City acquisition, PNC had businesses engaged in retail banking, corporate and institutional banking, asset management and global investment servicing"

So a company who makes its money on real estate transactions think you should buy homes now? Color me shocked.

The second hint that something might not be as it seems is the methodology

Quote :

"These judgments are determined by comparing median home prices, local interest rates, population densities and income, plus historical premiums or discounts that areas have exhibited over time."

Over what time frame...the past 4 years? Take a random sampling of any of the cities in their study and compare it to Case Shiller data. PNCs says San Diego is 17.6% UNDERVALUED, but you can compare it to CS

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=1946

and see that it is still quite elevated related to its long term norms.

2/22/2010 6:00:05 PM

Quote :

"Come on dude, that really doesn't pass the smell test. Your first hint that something is amiss is who commissioned the study"

Oh what a pussy copout. I post a non-biased third party study and you try to discount it because of who paid for the study? Why would anyone who is not involved in the housing market pay for a study on this? The fact is that they commisioned a non-biased third party economic study through IHS Global Insight a well respected economic research firm. Come on, don't renege, now you have to eat my shoe. Give me an address to mail my shoe, this half-assed attempt to dodge forfeits your right to choose which shoe.

here's their wikipedia page:
http://en.wikipedia.org/wiki/Global_Insight

Quote :

"Over what time frame...the past 4 years?"

1985-now, you could have at least browsed it, jeez.

[Edited on February 22, 2010 at 6:18 PM. Reason : ]

2/22/2010 6:18:08 PM

Since you're an expert in this study, can you explain how their results for San Diego are polar opposite that of Case Shiller?

Quote :

" Why would anyone who is not involved in the housing market pay for a study on this? "

I'm not sure why those people would either. Unfortunately, National City/PNC is HEAVILY involved in the housing market, as is most every bank in the country. What are you going to use to bolster your case next, something from the NAR?

[Edited on February 22, 2010 at 6:31 PM. Reason : .]

2/22/2010 6:28:53 PM

Quote :

"Since you're an expert in this study, can you explain how their results for San Diego are polar opposite that of Case Shiller?"

Well I'm no expert on this study, I just looked through it, if you'd like to know you can contact one of their economists. But this is irrelevant, you only asked me to show you some economists that agreed with the statement I made, I've done that.

Quote :

"I'm not sure why those people would either."

Yes you do. They knew the housing market was undervalued, just like I did, and they paid for someone to provide the economics footwork to prove it. Take for example another group that has contracted IHS Global Insight, Walmart. They contracted IHS Global Insight to show how much money they save the average family, they knew they save them money, they just wanted someone to do a scientific study to prove it.

Come on, man up, I said there were economists that back my statement, you asked me to show you them, and I did.

2/22/2010 6:55:04 PM

Quote :

"Please post an address I can mail my shoe to and a preference of right or left foot."

Doesn't count. You said most economists would argue that housing is currently undervalued, and your quote comes from a "real estate consultant".

2/22/2010 7:07:52 PM

Oh, you didn't actually click the link. It references a study done by IHS Global Insight a non-biased third party economic research firm.

2/22/2010 7:09:46 PM

Look, no one is impressed with your reading of wikipedia. As far as the shoe part, I said this

Quote :

"I'll eat your shoe if you can somehow back up the "most" part of your statement"

not this

Quote :

"you only asked me to show you some economists that agreed with the statement I made"

I guess I shouldn't have been shocked that there is a group out there that produced a study of what the payer wanted to hear considering the rating agencies were the model for that.

Quote :

"They knew the housing market was undervalued, just like I did"

Again, the housing market isn't undervalued in aggregate and you're probably only going to find a neighborhood here or there that had vast amounts of foreclosures kill the values short term. And this is before we consider the possibility of interest rates going to 6% or higher by year end.

[Edited on February 22, 2010 at 7:12 PM. Reason : .]

2/22/2010 7:12:25 PM

Quote :

"Look, no one is impressed with your reading of wikipedia."

Well he didn't bother reading my link and you didn't bother reading the study, so I'm not sure how much I can expect from you guys.

Quote :

" guess I shouldn't have been shocked that there is a group out there that produced a study of what the payer wanted to hear considering the rating agencies were the model for that."

That's quite an accusation to level against a company who's sole purpose is to provide non-biased research. The fact that most major economic sites wrote about this report would be enough to back it up to most people, but not you, as it would require you to put your foot in your mouth.

I've got to say, I'd expect this kind of stuff from arronburrito, but I had hoped for more from you. It doesn't seem like it would be that difficult for you to admit the creditability of this study. I really don't like it when people know they are wrong but keep going, just own up.

2/22/2010 7:43:49 PM

Look, you can keep typing snark type posts but no one is going to take any of that seriously if you continue to refuse to address how this dumb study by IHS is 3 sigma away from Case Shiller data.

Quote :

"I really don't like it when people know they are wrong but keep going"

I admit I am suspect about any study that is flying in the face of popular convention. But unless or until you decide to actually go through that study yourself and pick out the key elements that bolster the case that it is in fact a reasonable study, one worthy of more merit than Case Shiller, I'm not going to be bothered to think it reflects reality.


After you do that, you can go back and try and find more economists that say housing is undervalued. As it is now, you've got what I'd guess (if I'm way off here, feel free to interject) a team of maybe 5-10 that compiled that paid for research to produce the result PNC was looking for.

Quote :

"That's quite an accusation to level against a company who's sole purpose is to provide non-biased research."

IHS is a non-profit?

Quote :

"The fact that most major economic sites wrote about this report would be enough to back it up to most people"

Cnn money isn't most major sites. A googling of "America's most overvalued cities" reveals no hits of major econ publications on the first page. Though perhaps this isn't the official title of this report. So I go to their website looking for it. And right up front I land on this

http://www.ihsglobalinsight.com/Perspective/PerspectiveDetail18305.htm

Which is ripe with nuggets that conflict with the idea that markets are undervalued, such as:

Quote :

"And although the first homebuyers' tax credit had a huge impact, a second more-expansive one is hardly registering on the economic Richter scale. Indeed, many different currents are roiling the nation's housing market."

So even though homes are undervalued people still don't want to buy them with free Obama-dollars and interest rates at historic lows?

At this point, I think you need to start sizing up your own shoe.



[Edited on February 22, 2010 at 9:15 PM. Reason : .]

2/22/2010 9:04:23 PM

Dude, where did burrito go anyway? Did he realize he looked kinda dumb making this thread in the way he made it...all populist and liberal and shit?

2/22/2010 9:35:03 PM

Quote :

"Look, you can keep typing snark type posts but no one is going to take any of that seriously if you continue to refuse to address how this dumb study by IHS is 3 sigma away from Case Shiller data."

Why do I have to defend a study that was made by a group of professional economists against one set of data for one city for 19 years against a 25 year study of several major cities? You haven't even looked at the data I provided, why should I?

Quote :

"But unless or until you decide to actually go through that study yourself and pick out the key elements that bolster the case that it is in fact a reasonable study, one worthy of more merit than Case Shiller, I'm not going to be bothered to think it reflects reality."

You have one set of 10 year data for one city. How does that trump a study done by trained professional economists for several major cities reviewing a longer timeline of data?

Your entire argument here is that I'm wrong because the data I posted from a third party economic research firm is biased. If IHS did not do legitimate research, why would the get so much business? Companies could go out and find data that supports the claim they want to make easily.

The fact is they are a legitimate company and this is a legitimate study and the only argument you can come up with is that this study is somehow flawed. Pathetic.

Quote :

"Cnn money isn't most major sites. A googling of "America's most overvalued cities" reveals no hits of major econ publications on the first page."

Well obviously. Had you googled the correct thing you might of had some, idiot. You don't even know what you're arguing anymore.

Here's the link to the article, as if you couldn't click the link I gave you to begin with.
http://press.ihs.com/article_display.cfm?article_id=4023
and here's a reference to the article from marketwatch.com
http://www.marketwatch.com/story/home-prices-are-now-undervalued-economists-say

Quote :

"Dude, where did burrito go anyway?"

He had the courtesy to leave the thread after he was made to look like a fool, I wish you would do the same.

[Edited on February 22, 2010 at 10:43 PM. Reason : ]

2/22/2010 10:34:53 PM

That a lot of typing without defending really anything you've posted. I've destroyed your argument and if you can't see that then I have some undervalued beach property in Asheville I'm itching to sell you.

2/23/2010 6:25:46 AM

what a fun thread

2/23/2010 7:03:47 AM

^^ How did you disprove any part of the study I posted? You didn't even read it.

2/23/2010 8:18:09 AM

Aaron this sounds like class warfare bullshit to me

2/23/2010 11:39:53 AM

Quote :

"^^ How did you disprove any part of the study I posted? You didn't even read it."

I took a couple of samples, San Diego being the most interesting, and compared it to Case Shiller and found their result laughable. I simply have no interest in reading the details of why this study is so far off from the accepted standard for house pricing data. You haven't read it either.

When I actually did attempt to locate this study, I found another report from this very company that paints the opposite picture of the rosy one presented in this study. Only a boob on the wolf web would think this original study is credible.

This is before we have to bother mentioning a firm highly invested in real estate commissioned the study.

Again, feel free to tell me which parts of this study are worthy of contemplating. Since you read it, this should take you no more than 20 seconds to post.

2/23/2010 6:38:51 PM

Quote :

"compared it to Case Shiller and found their result laughable"

Oh, you took small samples out of a large study and applied them to the entire study.

Quote :

"When I actually did attempt to locate this study, I found another report from this very company that paints the opposite picture of the rosy one presented in this study."

Oh, you didn't read the link you posted either.

Quote :

"This is before we have to bother mentioning a firm highly invested in real estate commissioned the study."

Which is not relevant at all. IHS is not going to risk their reputation as a research firm by making things up. All that means is that if the people who paid for the study didn't like what it found, they wouldn't have published it, it doesn't make it any less true.

Quote :

"Again, feel free to tell me which parts of this study are worthy of contemplating."

The whole thing, considering it's what you asked for.

2/23/2010 6:44:23 PM

Quote :

"Oh, you took small samples out of a large study and applied them to the entire study."

Well, I did that and compared the entire conclusion, that the majority of the markets are undervalued, and compared it to CS data for the entire country which says they are still quite a bit elevated compared to their mid 90s pre-Easy Al nuttiness levels.

Quote :

"Oh, you didn't read the link you posted either."

Obvious troll is obvious.

Quote :

"IHS is not going to risk their reputation as a research firm by making things up."

Of course not, however they can construct whatever narrative they want and arrive at any conclusion they wish to reach. I have no doubts that they could come up with "good" reasons why paying 400k for an 800 sq ft shithole in San Diego is a good value even though you could have gotten that same home pre-bubble for 250k, that doesn't make the methodology worth considering and MOST economists aren't.

Quote :

"The whole thing, considering it's what you asked for."

Oh, the whole thing is worth considering because it confirms an erroneous assertion you made and not because it's actually a good study?

2/23/2010 6:52:03 PM

Quote :

"Well, I did that and compared the entire conclusion, that the majority of the markets are undervalued, and compared it to CS data for the entire country which says they are still quite a bit elevated compared to their mid 90s"

The study goes further back than that, and where exactly did you do that comparison to the entire study. I saw you posted one chart of one market for a shorter time period, hardly a claim against the market on the whole.

Quote :

"Oh, the whole thing is worth considering because it confirms an erroneous assertion you made and not because it's actually a good study?"

No, because it's a good study, but you seem set on trying to question it's creditability without even reading it.

2/23/2010 7:13:01 PM

You're still posting after having lost this badly? Global Insights own economists have a report that undermines this analysis. You know how I know? BECAUSE I FUCKING CLICKED THE LINK AND READ WHAT THEY HAD TO SAY.

Now would you like to keep trolling or do you have something worthwhile to add to this debate?

2/23/2010 7:22:24 PM

Quote :

"Global Insights own economists have a report that undermines this analysis. You know how I know?"

Just proof you didn't read either study.

2/23/2010 7:40:39 PM

That is the exact opposite of not having proof. Keep trollin douche.

[Edited on February 23, 2010 at 8:01 PM. Reason : .]

2/23/2010 8:01:36 PM

I had proof, a third party economic study by professional economists, you called it uncreditable. How could anyone use logic to argue with you?

[Edited on February 23, 2010 at 11:15 PM. Reason : ]

2/23/2010 11:15:16 PM

BUMP

Robert Shiller, inventor of the Case-Shiller Index was on NPR today and said "it's not likely that home prices are inflated".

3/24/2010 5:52:33 PM

I don't think there's any way of really knowing that. The market is still flooded with homes, so the market clearing price is probably lower. I would expect prices to go down even further, and since many people are anticipating that to be the case, they may go below their true equilibrium price.

I just like how these mainstream economists always explain bubbles (be they in the stock market or housing market) as irrational exuberance or animal spirits. It's god damn low interest rates, even Geithner (and to some degree, Bernanke) are admitting that now, yet we continue down the same path that created the housing bubble, except the mistakes we're making are much, much bigger in scale now. The dollar is the bubble, now.

3/24/2010 6:03:30 PM

Quote :

"I don't think there's any way of really knowing that."

We kind of stated in this thread that "compared to historical inflation adjusted values" was implied. In that case a very skilled economist like Shiller or a whole research team of economists would be able to confirm this.

Quote :

"The market is still flooded with homes, so the market clearing price is probably lower. I would expect prices to go down even further, and since many people are anticipating that to be the case, they may go below their true equilibrium price."

That's irrelevant to whether or not the prices are inflated.

Quote :

"It's god damn low interest rates"

Or it's god damn lack of regulation that allowed mortgages that are crap to sell for such inflated prices for so long encouraging companies to do that kind of risky lending for huge short term profits.

Quote :

"we continue down the same path that created the housing bubble, except the mistakes we're making are much, much bigger in scale now. The dollar is the bubble, now."

Any sort of reasonable economist is going to argue for low interest rates during a recession. When our economy starts to get going and we start to see inflation, then we should raise interest rates.

3/24/2010 7:15:42 PM

so, there's no fucking way that cheaper money via low interest rates encouraged more people to go out and make expensive purchases on credit (like a house)? naaaaah, that'd never happen

3/24/2010 8:35:37 PM

Quote :

"That's irrelevant to whether or not the prices are inflated."

Is it? I assume that by inflated prices, you mean the price of homes being higher than their actual value. Shiller argues that home prices are not inflated, which means they're either exactly at value (very unlikely) or undervalued. I'm arguing that the market is still not clearing, and that there are far more houses on the market than there is real demand for, given that many of those houses were planned and constructed during the housing bubble, a time where demand for housing was artificially increased because of low interest rates and easy money from the Fed.

I mean, you hear people saying it's a buyer's market right now. That's based off the assumption that home prices were too high at one point before 2007, and now they've come back down to earth and are "cheap." So, sure, in retrospect, it's a buyer's market compared to 5 years ago, but we don't know that houses won't continue to devalue. Time will tell, and I'm certainly not going to take a mainstream economist's word for it, because the Keynesians have been wrong every step of the way.

Quote :

"Or it's god damn lack of regulation that allowed mortgages that are crap to sell for such inflated prices for so long encouraging companies to do that kind of risky lending for huge short term profits."

The lack of regulation didn't seem to be a problem for most of human history. No one was making the assumption that home prices would go up indefinitely, because that would be a retarded assumption to make. The only reason banks were able to give out these interest only or 1-2% teaser rate ARMs is because of the federal funds rate being cut in the aftermath of the NASDAQ bubble. Artificial demand, caused by those too low interest rates, can only result in higher home prices.

So, yes, you can attempt to regulate the problem away. That might seem like a fine solution to some. I see it as treating the symptom, rather than the disease. You have to strike at the root of the problem. We have to figure out why banks were able to give out these risky loans if we want sustainable solutions. Sure, regulations might keep 0% interest rates from creating an even bigger bubble, but it's not a permanent solution.

Quote :

"Any sort of reasonable economist is going to argue for low interest rates during a recession. When our economy starts to get going and we start to see inflation, then we should raise interest rates."

No, absolutely not. A Keynesian economist might argue for low interest rates. Let's just go back a few years. 2001. NASDAQ bubble bursts. We all know what happened there. The internet craze caused people to speculate, and they invested in things that weren't worth all that much. The result was a bubble, and that burst, not even because of the Fed, but because people don't always react well to new inventions and technology. We had a recession after that.

Greenspan's grand solution was to slash interest rates. Why? The idea was that, since it's a recession, there is reduced consumption and reduced spending. People, having lost money, were underconsuming. That's a reasonable response to a recession. When you have a boom, there must be a bust, and savings have to be rebuilt. Of course, Washington hates savings, but they love spending. Spending is seen as an indicator of a strong economy, and it can be. You can't do whatever is necessary to increase spending, though, and think that you'll get a strong economy as a result. That's not how it works. That's like saying the cure to chicken pox is to put make-up on all the bumps.

Now, we're all waiting for this fateful day when "the economy starts to get going." Unfortunately, I don't think that day will come until we have a massive collapse and restructuring of the government and the debt. The Fed has no exit strategy. They're just talking about the possibility of raising interest rates in the future. I can't even imagine the depression we would enter if the Fed raised interest rates in this economy, though. Especially if they raised it enough to undo the damage caused by an extended period of low interest rates and quantitative easing.

3/24/2010 10:54:06 PM

Quote :

"We kind of stated in this thread that "compared to historical inflation adjusted values" was implied. In that case a very skilled economist like Shiller or a whole research team of economists would be able to confirm this. "

Well, that's only one part of he "inflated price" equation. The other is the actual value of the house too. While the prices now may be equivalent to their inflation adjusted historical counterparts, is the actual quality of the home, including materials, construction and desirability similarly equivalent? That is, McMansion town homes may all be at the same price as ranch homes on 1 acre lots were 20 years ago, but that doesn't mean that people actually want to pay that much money for a poorly built clone of their neighbor's houses attached at one wall with 200 ft^2 of land.

3/25/2010 8:04:56 AM

Quote :

"Or it's god damn lack of regulation that allowed forced mortgages that are crap to sell for such inflated prices for so long encouraging companies to do that kind of risky lending for huge short term profits."

Fixed that for you.

3/25/2010 9:19:43 AM

Quote :

"so, there's no fucking way that cheaper money via low interest rates encouraged more people to go out and make expensive purchases on credit (like a house)? naaaaah, that'd never happen"

Banks didn't offer those loans just because of the interest rate, they didn't even offer them mostly because of the interest rates. They offered those loans because we didn't have proper ratings and they were making tons of money off selling all kinds of mortgages.

Quote :

"I assume that by inflated prices, you mean the price of homes being higher than their actual value."

You don't have to assume anything, I said exactly what I meant.

Quote :

"which means they're either exactly at value (very unlikely)"

How is that "very unlikely"?

Quote :

"I mean, you hear people saying it's a buyer's market right now."

I never said that.

Quote :

"Time will tell, and I'm certainly not going to take a mainstream economist's word for it, because the Keynesians have been wrong every step of the way."

Well Shiller is a pretty smart guy, he called the housing bubble. And IHS isn't Keynesian.

Quote :

"The lack of regulation didn't seem to be a problem for most of human history."

Didn't it? The market worked inefficiently before we had a lot of government intervention in markets.

Quote :

"The only reason banks were able to give out these interest only or 1-2% teaser rate ARMs is because of the federal funds rate being cut in the aftermath of the NASDAQ bubble."

It could also be because they could sell those mortgages for a healthy profit on the secondary market.

Quote :

"Sure, regulations might keep 0% interest rates from creating an even bigger bubble, but it's not a permanent solution."

This is economics, there are no magic bullets, there are no "permanent solutions".

Quote :

"That is, McMansion town homes may all be at the same price as ranch homes on 1 acre lots were 20 years ago, but that doesn't mean that people actually want to pay that much money for a poorly built clone of their neighbor's houses attached at one wall with 200 ft^2 of land."

Now your problem is with builders? What makes you think that the market is unable to give people the products they demand?

3/25/2010 5:43:39 PM

Quote :

"Banks didn't offer those loans just because of the interest rate, they didn't even offer them mostly because of the interest rates."

The banks offered the loans because people were fucking asking for them a lot... and people were asking for them a lot because, say it with me, "interest rates were artificially lower than they should have been." And why were those rates lower than they probably should have been? Riiiight. Cause that's where the Fed put them. Wow, that was hard!

3/25/2010 8:06:28 PM

Quote :

"The banks offered the loans because people were fucking asking for them a lot"

Well the bank wouldn't give them a loan if they couldn't sell the loan on the secondary and make some money.

Quote :

"and people were asking for them a lot because, say it with me, "interest rates were artificially lower than they should have been.""

There are risky loans at any interest rate, low interest rates didn't make risky loans any proportionally higher.

3/25/2010 8:33:38 PM

no one is arguing that low rates made for riskier loans.

3/25/2010 9:58:27 PM

then what are you arguing? That low rates made more loans? The total number of loans had nothing to do with the crash, the number of risky loans that were overvalued and rise in proportion of risky loans are what caused the crash, and all of that traces back to inaccurate ratings.

3/25/2010 10:58:06 PM

If we're now clear on how the Fed's rate did not cause the bubble, can you apologize to mls09 who you berated with an argument that you can now see is wrong?

[Edited on March 26, 2010 at 8:25 PM. Reason : ]

3/26/2010 8:24:56 PM

the bubble does NOT mean risky loans, dumbass. Nice try, though.

but seriously... cheap rates for borrowing didn't make people go out and borrow. really? you should stick to telling us all about how those evil republicans are filibustering in the house

[Edited on March 26, 2010 at 8:40 PM. Reason : ]

3/26/2010 8:36:07 PM

so then you disagree that subprime mortgages caused the bubble?

3/26/2010 8:40:19 PM

i never argued as such. I can hear the filibuster in the house RIGHT NOW.

you are the king of strawmen

3/26/2010 8:55:10 PM

Explain to me how the low fed rate expanded the proportion of risky mortgages.

You could say that a low fed rate made the bubble worse, but you can't say it caused it.

Also it's funny how you're still childishly parading around an argument that I never made while at the same time accusing me of strawman.

3/26/2010 8:58:39 PM

dude. I NEVER SAID THE FED MADE RISKIER FUCKING LOANS! that is why it is a strawman. dumbfuck

3/26/2010 9:04:16 PM

Then how did the fed rate cause the bubble? You did say that. And seeing how the bubble was caused by the mortgage market being flooded with overpriced risky mortgages, how did the fed rate cause that?

3/26/2010 9:08:06 PM