The ECONOMY ,Stock Market, , & General Finance

I think there is a high probability you may be right.
I had this exact same thought as well.
Many people in this forum are not old enough to remember what went on during Carter.

 

When I entered the field of Real Estate as a way to earn my living, I recall the slow market under Nixon. I did not then connect it to him. Rates were still low. Inflation was not yet the super problem.
Carter was president and fairly or not, a lot of us blamed him. As they now blame Trump. I blame Biden for things he really did and not due to fake news put out by the media.
I mean, though Biden loved the Russian pipeline, he hated the Canadian US pipeline. I wondered why Biden wanted to help Putin make money.
Why is Biden working hard for Mexico right now? Mexico more than likely wants those illegal alien's gone. And Biden is working for Mexico.

As to the Nixon economy, fuel was the major problem. For Biden fuel is his major problem. He hates liquid fuels.
The minimum wage in CA in 1971 was only $1.60 per hour.

40 hrs x $1.60 x 52 weeks and you earned $3,328 per year.
People forgot that.
My first year selling Real Estate earned me around $28,000. My house payment was $135 per month. I owned my two cars. My house payment included property taxes and also home insurance.
My first year selling Real Estate i purchased 2 more homes.

So for me, times were great. But for a lot of agents, they had a hard time selling homes. I parlayed my skills selling for my own Machine shop to educated buyers into a living selling homes to people who were not professional buyers.

 

I wonder if inflation might have inadvertently caused the housing bubble.

Ignorant and dumb people see housing prices going up (though entirely due to inflation, at first) and they think it makes sense to pay more because housing prices are going up.
Also rich people and investors are afraid of inflation eating away their savings so they put their money into real estate, driving prices up.
This then starts the bubble.

 

I did some research on that in 1972-3.
I got my hands on a research book done by a major bank.
They gave figures on the issues you ask about.
I kept tracking those numbers for another 10 years.
I wanted to ferret out any patterns.
When homes start costing more, there is a shortage. In my area the contractors were building thousands of new homes. We had thousands of acres that were developed. So those homes acted as a stabilizing force. By 1980 they had built most of the new homes. And we had some major industry. And it was so called clean industry.
Rates on interest were fairly stable for a long time.
As they now have been.

Population growth was going our way. We were part of Silicon Valley. That was where later Obama was proud of Solyndra. It went Bankrupt.

Tesla is there. And Peterbilt Motors was for many years only in our adjacent small town.
We had a seriously good community college. We were not far from San Jose State. Stanford is across the Bay.
I noticed that in the 1950-60 era, homes went up in price about 5.5 percent per year. But by 1960-70, the increase was about 13 percent per year. This was pretty stable until Carter.

I was told days back by my son that here in Idaho we plateaued this year. He says and I plan to check for myself, that there are more homes on the market than needed now.

And of course when it gets cold, things slow down.

I will try to report on this sometime this week.

 

you mean the bubble when Bush was POTUS?

that's easy

for many decades post WW2, the percentage of home ownership remained fairly constant. There were folks who just didn't want to, or couldn't buy homes. Let us not forget that the way most folks bought their FIRST HOME was by sacrificing going out at night, working a 2nd job and good old fashioned thrift. They were working toward a goal to get to 20% for a down payment and to realize the term that we seldom see these days, pride-of-ownership. Owning a home was like placing a flag in the ground to show others that you made the sacrifices, worked toward your goal and achieved it.

What was then true in the 80's was owner-occupied homes within major urban areas dropped and units became rentals or abandoned. We had "white flight" as folks hate to label it but crime increased and family folks moved.

Politicians, mostly Democrat, figured that these residents in urban areas were incapable of scrimping and saving and saving toward a hone purchase and completely ignoring the home-ownership percentage which had been constant. Yes, another racist policy where it was believed that skin color was the reason that you couldn't save or make sacrifices. ( this timeline happened to coincide with the family breakdown after welfare programs were expanded)

So the solution............remove the requirements of not only down-payments but even normal amortization tables. What then happened is mortgage brokers popped up everywhere and enterprising people saw that they could now own 3 or more homes and try and "flip" or rent them where before, they would never have qualified for a loan on a 2nd home.

What did these incompetent politicians think would happen???? Fast forward to the 2008 election and the problem created by politicians (mostly Democrat) then became a battle cry for Democrats that they could fix it.

Enter Dodd-Frank which then caused many profitable small businesses to crater...............but that's a story for another day


Democrat votes have consequences; never ever any good for the common folk

Every single thing that a Democrat politician touches turns into big steaming pile of dung for the common folk

 

You get some things right - mainly the part about decreasing requirements - but your attribution mainly to the Dems is way off base - and you leave out a whole buch of factors that were on the shoulders of Bush to deal with.

First and foremost - this was an "Inside Job" - thats been proven 6 ways to sunday .. you can start by watching the movie/documentary .

The financial shinannigans that were 1) allowed and 2) allowed to continue long after the sub-prime segment of the market shot through the roof around 2003 - and everybody knew - especially at this point.

Like throwing a handfull of stones into a crowd - don't know which person is going to get hurt - but someone will.

 

no sir, the guilt was squarely on the shoulders of majority Dem reps and the blame, as you just did, was aimed at bush purely for political reasons

It once again demonstrates what happens when govt tries to somehow modify behavior; can you say cash-for-clunkers, stimulus and even now, payments for being unproductive.

Let's let Reagan summarize

 

Nonsense. If they can't borrow, they will just print the money. What they really want is both so they can spend whatever they like. Pure economic suicide. Eventually it will bankrupt federal government.

 

How long until that happens?? Worst case scenario??

 

I don't know. It depends on how much debt the government amasses and how much inflation the people can tolerate. The point is that current fiscal behavior is doing harm, not good. It is not sustainable. Will we stop doing it before there is a collapse? I don't know. I hope so.

 

What will it take to prevent such an negative outcome??

What Would a collapse look like??

 

A smaller more competent federal government that lives within its means. The voters need to be taught to understand what is in their long term interest. It isn't government spending designed to buy votes. We had such a government during the Jackson and Coolidge administrations. It isn't hard to find a model.

1929 on steroids.

 

Printing money and borrowing is really the same thing. The money is printed by the Fed and borrowed by the government. We have been doing it since 1913, and year 2020 busiest money printing year in US history, and its not even close.

Reagan is the only president who TRIPLED the national debt, but he talked a good talk.

Correct. In 2004, the rates were very low and Greenspan stood in front of TV cameras and told people to take advantage of the exotic APR loans when the rates had nowhere to go but up. It was election year after all, and "W" initiated 40 measures to push loans to minorities and others who would normally not qualify for them.

It has been the norm since Nixon, but you can call it 'current', since nothing has changed.

 

Only partially true. There is a large global demand for federal bonds. Selling bonds is not the same thing as expanding the money supply. Selling bonds is borrowing. Expanding the money supply is akin to taxation by devaluing the money.

 

Government selling bonds IS a way of expanding the money supply.

Ways to increase the money supply

1. Print more money – usually, this is done by the Central Bank, though in some countries governments can dictate the money supply. For example in Zimbabwe 2000s – the government printed more money to pay wages.
2. Reducing interest rates. Lower interest rates reduce the cost of borrowing. This makes investment relatively more profitable, and so encourages economic activity. Consumers will also see cheaper mortgage payments leading to higher disposable income. Read more – effect of cutting interest rates
3. Quantitative easing The Central Bank can also electronically create money. Under a policy of quantitative easing, they decide to increase their bank reserves ‘effectively create money out of thin air’. The created money can be used to buy assets; the idea is to increase cash reserves of banks.
4. Reduce the reserve ratio for lending. The reserve ratio is the percentage of deposits that bank keeps in cash reserves. If the reserve ratio is reduced, then the bank will lend more and due to the money multiplier, we will see a rise in bank lending. Central Banks can set a minimum reserve ratio. Reducing this ratio
5. Increase confidence in the banking system. If banks have confidence in the financial system, then they will be more willing to lend. In the credit crisis, it was necessary for the government to guarantee bank deposits and nationalise struggling banks
6. Central Bank buying government securities. The Central Bank pays investors holding bonds. If the Central Bank buy Government securities (or corporate bonds) people who were holding the bonds have more money to spend. Banks see illiquid assets become liquid. Therefore, in certain circumstances, this can lead to an increase in the money supply. However, it depends on whether the bond purchases are sterilised or ‘unsterilised’. Unsterilised means they create money to buy bonds.
7. Expansionary fiscal policy. In a recession, there is often a ‘paradox of thrift’ business and consumers want to increase savings – and this leads to a fall in spending and investment. If the government borrows from the private sector and spends on public work investment schemes then this will start a multiplier effect where households gain wages to spend and encourage private sector investment.

 

Reagan was the worst offender out of all of them - princess with a credit card he was.

You say "NO NO NO" in this post - but give nothing in support of your claim - or address my points.

The Bush admin was in power for 7 years prior to the crash .. Blaming the dems for their incompetence - doing nothing to prevent what they knew was happening.

Was it the Dems in Power while the rating agencies were rating Junk as AAA ? Nope .. that would be Bush. Was it the Dems that failed to act when the sub prime market went parabolic .. nope .. that would be Bush.

 

ahhh, so it's only the POTUS and not the lawmakers namely, Congress

Democrat voters are so predictable. 2007-2009 your Democrat party had the house and senate.

As I've stated, Democrat votes have consequences; never good for the common folk

 

There has been a housing bubble but it isn't because of "inflation". It is because of insanely low interest rates. Has been going on since last year. Someone I know who works in that industry told me that people too afraid to go into a store weren't too afraid to refinance or buy at the below 3% rates. They have been backlogged since the start of COVID due to high demand. You can afford to pay 15% more for the same house at the same monthly payment if your rate is 2.9% instead of 4.25%

 

Never said any such thing.. If there is legislation that is doing massive harm - regardless of who passed that legislation - it is up to the Administration at the helm to change that legislation.

Show me the legislation red or blue which allowed banks to give morgages ti people with no job or credit - you havn't done this - and in fact it is a few different things as the banks need to be able to sell that mortgage - get it off their books.

Had you done this .. and it was all Blue legislation - you would still be wrong - because at the time the legislation could have been fine .. and even if it wasn't was not causing disaster. When trouble did start brewing - from this legislation (Hint) which took down the wall between retail banking and investment banking - it is up to the administration in power to act.

If the Dems put oil in a car rated for 5000 miles - during their tenure the miles put on are 4000... then at 8000 miles while Bush is driving the car - the engine light comes on .. it is up to Bush to change the oil .. not the folks who put the oil into the car.

 

Your claims are either ignorant, or just absurdly partisan. The actions to prevent the crash should have been taken around 2003-04, but its not in the politicians DNA to choke down when economy is rolling. The Fed actually has a mandate to act, but even they only threw more fuel in the fire.

Instead, they did things like this (see below), which literally crammed money down low income folks throats so they can buy things they can't afford. Yes, votes have consequences, and there is no hope as long as people think that only one party makes bad policy :

America's Homeownership Challenge - George W Bush
https://georgewbush-whitehouse.archives.gov/infocus/homeownership/homeownership-policy-book-ch2.html

- Mobilizing the Private Sector: America's Homeownership Challenge
- Establish a national goal of at least 5.5 million new minority homeowners before the end of the decade.
- Challenge the private sector real estate and mortgage finance industries to dramatically increase their efforts to reduce the barriers to homeownership faced by minority families and to work with the nonprofit sector in a concerted effort to achieve this goal through national and local partnerships.
- Convene a White House Conference on Increasing Minority Homeownership, to highlight the homeownership barriers faced by minorities and develop proposed solutions.
- A substantial increase of at least $440 billion in the financial commitment made by the government-sponsored enterprises involved in the secondary mortgage market, specifically targeted toward the minority market;
- Twenty-five different local initiatives to be undertaken across the nation, geared toward eliminating the specific homeownership barriers faced by minority families in those communities;
- A commitment to raise $750 million in below-market-rate investments by 2007, which will work in collaboration with local homeownership initiatives and be targeted to heavily minority program areas;
- Pursuing strategic partnerships in 20 top housing markets between homebuilders, lenders, local officials, and community leaders to develop approaches that address the local challenges to building homes for minority families living in urban centers;
- Establishing of faith-based housing partnerships between the participants and at least 100 churches, mosques, synagogues, and other faith-based institutions;
- Aggressively developing new mortgage products so that conventional market alternatives are available to combat the predatory loan products that are disproportionately targeted to minorities;
- Creating new mortgage products to meet the unique needs of recent immigrants;
- Dramatically expanding financial education efforts for minorities, providing financial counseling to at least 380,000 minority families, and taking measures at the local level to reduce predatory lending; and
- Establishing multilingual, consumer-oriented internet Web sites designed to help minorities overcome barriers to homeownership, including creation of a central data bank of affordable housing programs made available to real estate agents when working with clients.

 

Yes....LONG TERM planning. Planning For generations ahead...........a bit like the Chinese do How does one change a culture that is rather instant gratification oriented?? On a smaller scale......our credit card culture is an example of" I want now........and wil pay later"....... mindset.

How does one "teach" the voter to change their behaviors and thinking.??

 

I agree. Our system doesn't lend itself to long term planning. We should teach fiscal responsibility in school. When I was kid everybody had to learn civics. We don't do that any longer but we could make learning money management as a required course of study in high school. One major problem is that economists don't agree on anything other than the law of supply and demand. It isn't likely that public schools could put together the right message. Other than that, private sector advertising is the only thing that might help. Nobody in the private sector can make money teaching responsibility so that won't happen. Government certainly won't do it. It doesn't believe in fiscal responsibility.

Hence we have what we have. I have always believed in requiring a qualification test for voting but that would be unconstitutional. I guess I'm stumped. If people put their personal greed ahead of the nation's benefit, we will have this for long time. Politicians will continue to buy votes.

 

No it is a way to create a debt that involves interest and repayment. Expanding the money supply has none of that. The problem with economics is that economists can't seem to agree on anything beyond the law of supply and demand. See below:

I agree with #1 and #6 above. #6 is why I said you were partially correct (in my opinion.) But I reject the notion that debt and inflation are connected in some way. They are separate evils with different effects as I said above. Obviously one can find an economist that supports nearly anything.

 

Watch Out Economy. Biden Screws Uo Everything He Touches. Workers Who Maintain Supply Chains Warn of Worldwide ‘System Collapse.’

Just close your eyes and chant "transitory". When that doesn't work switch to finger pointing and chant "profiteering".

 

gee, using Covid as an excuse to impoverish folks and injure them. Statist politicians would never do that.....................