This article will be the most important one you'll ever read about the late-great-housing-ponzi-scheme. Essentially a shocking admission from the Fed that they caused it, that the government's inflation reporting is bogus, and that the collapse of the speculative bubble will now wash away trillions of bogus equity from the market.
Enjoy HP'ers - everything we've discussed about the bubble, everything we've pointed out to the mocking of REIC trolls, has been verified by the Fed this morning.
Official Says Bad Data Fueled Rate Cuts, Housing Speculation
In an apparent and rare in-house critique, the president of the Federal Reserve Bank of Dallas said that because of faulty inflation data, the Fed kept interest rates too low for too long earlier this decade, fueling speculative housing activity.
A number of critics have said the Fed under former chairman Alan Greenspan kept monetary policy too easy from 2003 to 2004. But Richard Fisher's remarks to the New York Association for Business Economics yesterday mark the first time some Fed watchers could recall a sitting Fed policy maker making such comments.
Mr. Fisher noted that subsequent revisions show PCE inflation was actually a half a percentage point higher than originally estimated.
"In retrospect, the real Fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer than it should have been," Mr. Fisher said.
"In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets.
"Today...the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the [Fed's] task of achieving...sustainable noninflationary growth."
Jan Hatzius, chief U.S. economist at Goldman Sachs, called Mr. Fisher's remarks "pretty striking," while noting it is Mr. Fisher's style to be opinionated. He added that while he agrees the Fed's policy from 2002 to 2004 fueled speculative housing-bubble activity, it was still reasonable "knowing what you knew at the time. You take out some insurance against a really bad, low-probability outcome, and after the fact you regret having paid the insurance premium."
44 comments:
So who Do I sue first? The Fed, The Lender, or The Realtor The Appraiser ?
Sure no one put a gun to my head and said Sign on the dotted line, but I also should not have been scammed into buying $500,000 box that is not worth or will not be worth a quarter of what i paid for it.
Of course this is not my situation but it is out there for sure.
Scammed by our own goverment, and familys are falling apart over it...
what's amazing is that there are still fools out there in denial (or outright liars) like Greg Swann at Bloodhound Realty
Anyone who reads this article and then goes and buys a house today would be a massive fool. Period.
"because of faulty inflation data, the Fed kept interest rates too low for too long"
Which is why I believe the fed will NOT lower interest rates. Why would they re-lower the interest rate if it was there for too long already? And the inflation data is still faulty, is'nt it?
emperor has no clothes
Smug
This reminds me about one "true" story about USSR:
On October 14, 1964, after being deposed by his rivals at a Central Committee meeting, primarily for being an "international embarassment," Nikita Khrushchev, who until only moments earlier was the First Secretary of the Communist Party of the Soviet Union, sat down in his office and wrote two letters.
Later, his successor, Leonid Brezhnev, upon taking office found the two letters and a note Khrushchev had attached:
"To my successor: When you find yourself in a hopeless situation which you cannot escape, open the first letter, and it will save you. Later, when you again find yourself in a hopeless situation from which you cannot escape, open the second letter."
And soon enough, Brezhnev found himself in a situation which he couldn't get himself out of, and in desperation he tore open the first letter. It said simply, "Blame it all on me." This Brezhnev did, blaming Khrushchev for the latest problems, and it worked like a miracle, saving him and extending his career. However, in due time Brezhnev found himself in another disaster from which he could not extricate himself. Without despairing he eagerly searched his office and found the second letter, which he tore open desperate for its words of salvation. It read thus:
"Sit down, and write two letters."
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So the first letter has now been used... :)
It's election day! If this was a stock chart, would you buy any shares?
Chart of Approval
Demographics and regional economics, specifically salary to afford a home purchase, are the only viable long terms indicia for house prices. A house is an assembled commodity, like a car or groceries, not an investment. Its only real value basis is as an economic equivalent in rent or utility replacement. I look forward to this adjustment, as it will be the prelude to a true housing shortage in my neighborhood and most likely many of yours. Once the supply of money and speculative building reacts during the next 36 months, those without cash (the no money down crowd)to buy will revert to renting and new houses will be orderd and paid for prior to breaking ground. The supply will adjust and the money supply will be priced at much higher levels to reflect the historical default experience that is now under way. You can each see the trend. Absent cash and decent ratios in five years only those with the income and cash on hand will own a house. And thats makes a rational market that balances supply and demand and reflects risk versus price. (I am not an economist, just a working guy who spends and saves prudently.)
WOW!
I really don't know what to say. This is going to make the "correction" even faster and sweeter.
I went to a forclosure sale of sorts yesterday, guy was selling everything he owned for penny's on the dollar...everything!..once that HELOC borrowing dried up his wife up and left him holding the bag..And this guy had toy's upon toys..nice furnishings macked out tools in the garage..and here I am stadning there watching this fellow trollope people around his home, selling his life's work...sad situation for sure.
hmmm, the Fed sounds a lot like Bush: "it's the faulty intelligence!"
Yeah, right... you're a scamster!
This is pathetic. It's a weak Fed attempt at maintaining control. Major economists have been screaming for years that flooding the system with liquidity causes speculation. And lowering the rate to 1% caused speculation in the housing market. Now that even sheeple are picking up on it, the Fed has to come out talking about "hindsight", yada yada. Yeah, just like, "You can only see a bubble once it's burst"...Give me a break. They knew exactly what they were doing. I'll perk up when they clean up their statistics, use rents AND housing prices AND energy AND food AND insurance costs AND health care costs in the inflation rate - and what about those M3 numbers? And everything else they're hiding? Fisher's statement means NOTHING. The media will spin it (note Goldman Sachs is leading the charge) to make it seem like it's momentous - like NOW we can count on the Fed...NOT!
Read between the lines.
The feds admission is the beginning step of the new sheeple bailout.
"We're sorry, it is all our fault.Here is a new loan to replace the toxic ones we created. Now go out and buy some cheap Chinese crap with the excess to keep the economy going."
It would be sad if it really was his life's work but all that stuff is the work of the HELOC. His work has just begun. He'll be working for a long time to pay off the deficiency judgement on his HELOC.
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Whatever the situation was, from a human prospective not a monitary one it was sad to see, and I actually felt for the guy, you could see the loss in his demeanor. Go from living High on the Hog to loosing everthing at the stroke of a pen..F'ED up for sure..but you are correct there are 50 more others waiting to dump their stuff also.
It would be sad if it really was his life's work but all that stuff is the work of the HELOC
Love that response. I expect to see a lot of penny on the dollar sales in the coming year.
that Perspective not prospective my bad
oh and the Harley's (2) in the garage were Mint fully dressed!!!!!! $22,000 to $25,000 each new..$10,000 or best offer take it away cash only.
You ain't seen nuthin yet!
As basic as my education was, i could have figured out that keeping rates too low for too long was going to be trouble!
So how come the 'educated' were still able to F**K it up?
Now, how would they know so soon?
Maybe there was already rumblings and complaining at the Fed during Greenpan's reign---but everybody was too afraid to actually confront the ol geezer.
Sort of like the generals whose correct and sensible advice was rejected by Donald "Iraq is not Vietnam and I am not another McNamara, really I swear!" Rumsfeld, master of maximum arrogance dipped in maximum cluelessness.
And why would ol Greenscam keep on going?
a sad devotion to that ancient religion known as Republicanism.
I'll perk up when they clean up their statistics, use rents AND housing prices AND energy AND food AND insurance costs AND health care costs in the inflation rate
No freaking shit.
When The They took out actual housing prices completely out of the inflation figures that's when the stage was set for jimmying.
They assumed that the price-to-rent ratio was going to stay an economic constant and then they could use the easier "owner equivalent rent". So we know that during the housing bubble rents were stagnant as everybody with a pulse tried to buy something. Now that's reversing, and people are renting. So right as we head into recession the inflation "feels" like it is picking up (which it is), even more from this statistical screwup.
Another cheat:
You know how your health care costs are exploding? The insurance rates are skrocketing? Guess what? That doesn't count as "inflation"!! as the Fed just assumes that the increase means that people are using more and quality and technology is getting better.
But when these outrageous increases get passed to the employer, guess what happens---this comes out on the other side as "increased compensation"----yes the additional money the employer has to pay to the insurance extortion racket makes up almost all of the supposed "compensation increase" during the recent expansion.
The other part of "total compensation" has been extreme stock option awards to a miniscule minority.
Strip those two effects out, and put in realistic inflation measures, and you'll probably find that most people have gone nowhere in real economic terms since the start of the expansion. It will be the first economic expansion in US history which did nothing for people. Wanna make a bet the recession is going to whack plenty of us?
Am I just a bitter complainer? You betcha! (but I have facts on my side, I believe) PhD in hard science, unemployed involuntarily since April)
Gee, i think old greenscam was around during the 'Slick willie' years as well, but how can that be their so pure and chaste!
Greenscam is a bootlicker to power, but he he does extra "free" tricks for Republicans.
anon: "Gee, i think old greenscam was around during the 'Slick willie' years as well, but how can that be their so pure and chaste!"
WAKE UP!! Every time anyone falls for the red versus blue scam, the rigged game slips further from view.
Take the estate tax. The average American has an IRA or 401K. Let's say someone dies with only a little money in an IRA to their name. Even ONE DOLLAR will be taxed AS INCOME to the beneficiary - regardless of any elimination of estate taxes. So what the elimination of estate taxes will REALLY do is pave the way for dynasty formulation for the rich.
SO why hasn't the Red OR the Blue side of Congress fought this and looked after OUR interests? Because it's not in THEIR interest to do so. They're rich and have a shot at creating their own dynasties.
Start focusing on WHAT these people are DOING and NOT what party they're (not THEIR!) in. We should call them out on each decision they make that is not in the interest of the American people. And we should stop falling for the good cop/ bad cop scam!!
Bork wrote:
“I went to a foreclosure sale of sorts yesterday, guy was selling everything he owned for penny's on the dollar...everything!..once that HELOC borrowing dried up his wife up and left him holding the bag..And this guy had toy's upon toys..nice furnishings macked out tools in the garage..and here I am standing there watching this fellow trollop people around his home, selling his life's work...sad situation for sure.”
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Somewhere in this story there is a message. All that consumer crap that everybody is so infatuated with, does not guarantee happiness.
Real things like family, having good health, doing things that you enjoy, and having the time to do it in - this is what really matters in life.
-Mammoth
Don't even get crazy, Fisher was told to say those things. They are trying to being in the plane...
Somewhere in this story there is a message. All that consumer crap that everybody is so infatuated with, does not guarantee happiness.
Real things like family, having good health, doing things that you enjoy, and having the time to do it in - this is what really matters in life.
-Mammoth
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For real brother, and you want the kicker to this story, in standing there talking to this guy, for like a half hour, he turns to me and says:
" I was goin to leave all this with the house, as i am taking what i can carry and heading off to Florida"
All the Material possessions in the world will not make you happy and this like many, many more after him will be a prime example for sure.
oh and yes I did buy something, nice set of pumpjacks, platform, practically brand friggin new, he said he paid close to $1000, used it one time ...drumroll please .......$150
Trailer space for rent! My too smart father in law, now has 3 5th wheel trailers in his Northern SD county back yard. Took 2 helocs out on a POS shack that the bank never looked at, just sent the cash to him. He burnt it faster then a joint at a greatful dead concert. You ask him about the market and its still going up.
He burnt it faster then a joint at a greatful dead concert.
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ROTFLMFAO! NICE!
>> Somewhere in this story there is a message. All that consumer crap that everybody is so infatuated with, does not guarantee happiness.
That's what the rich would have you believe...
But I thought it was those tax cuts that gave us the great economic growth we've had these past few years. You mean it was all an illusion?
Maybe this is part of a big scheme by the Fed to hurry people off into debt so that they become compelled to do the jobs that Americans don't want to do.
They jobs Americans don't want to do will soon become the jobs they have to do??
the Federal Reserve as a private entity should be held legally liable for all monetary damages inflicted on a person by inflation
The FED is trying to talk up the long bond
They don't say things like this without an agenda of some kind
anaon: "the Federal Reserve as a private entity should be held legally liable for all monetary damages inflicted on a person by inflation"
Yes! But that's only half the issue. The other half is who gets to come up with the inflation number and how accurately it's represented.
1) do not feed the trolls
2) do not threadjack
3) do not swear
4) do not threaten
5) do not use racist language
6) do not bore
7) do not post full articles
8) do not hog the conversation
This is Keith's House...RESPECT IT!!!
Jeffrey Lacker also admits it was too low. He is the only one voting for rate hikes.
Anon said: "Maybe this is part of a big scheme by the Fed to hurry people off into debt so that they become compelled to do the jobs that Americans don't want to do.
They jobs Americans don't want to do will soon become the jobs they have to do"??
Yes, jobs Americans felt they were too good to do. I 100% agree.
In the last 6 months, the only people I see working at Chevy's here in Reno are whites. When we ate dinner there about a year ago, our waitress spoken very broken english and the staff all were hispanics. Now, cheery people who speak perfect english are serving, seating and cleaning tables.
A refreshing change, I'd say.
Anon said: "Maybe this is part of a big scheme by the Fed to hurry people off into debt so that they become compelled to do the jobs that Americans don't want to do.
They jobs Americans don't want to do will soon become the jobs they have to do"??
Yes, jobs Americans felt they were too good to do. I 100% agree.
In the last 6 months, the only people I see working at Chevy's here in Reno are whites. When we ate dinner there about a year ago, our waitress spoken very broken english and the staff all were hispanics. Now, cheery people who speak perfect english are serving, seating and cleaning tables.
A refreshing change, I'd say.
LV,
How many Americans are willing to do the jobs currently being done by Mexican farm laborers? Being a (hobby) gardener I can tell you that it is hard work.
I'm sure not too many Mammoth.
But what's a poor realtor to do?
For some odd reason, it is difficult to imagine these people working as laborers. The assumption is that realtors see themselves as being “above” doing any sort of work which requires them to get their hands dirty.
BTW, LV, a while back I wrote a post about a new manager at work who moved here from Florida and had a house (in Coral Gables) there on the market. You wrote:
‘Mammoth said: "Let’s wish him lots of luck selling his Florida property! The first time he whines about making two house payments I will post his comments to this blog. Stay tuned"! We'll be waiting!
Thursday, September 21, 2006 2:04:19 AM’
Well, he has been whining on and off over the past few weeks. But now the house sas found a buyer and is supposed to close this week. The asking price was 344K; he is getting 332K for it. That’s a 3.5% decrease. When he told me the news, my jaw hit the desk. But I still believe there is a housing bubble and that the ‘you-know-what’ is going to hit the fan.
It may not be a bad time right now for more people to learn how to grow some of their own food!
Cheers,
-Mammoth
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