We probably weren't the first to use that language here at HP and we definitely won't be the last. But the Late Great Housing Ponzi Scheme is now being called what it was, and the MSM is running with it. Bravo!
Here's today's AP report, where professor Peter Morici of Maryland either is a HP devotee or on the exact same page.
Too bad Greg Swann and his ilk are either too dumb or too corrupt to understand what to us is obvious - that the bubble was a classic speculative frenzy, not supported by the fundamentals, and a classic Ponzi Scheme.
Peter Morici, business professor at the University of Maryland, said artificially low interest rates over the past half-decade encouraged China and other exporting nations to purchase 10-year bonds, which kept U.S. mortgage rates low and fueled the housing bubble _ despite a gaping trade deficit that should have sapped investor confidence years ago.
"In order to play this ponzi scheme, the value of the homes had to go up faster than the economy grew and faster than people could service their debt. We've reached that limit," Morci said. "The housing market sustained the economy at a time of very large trade deficits. It's been a false prosperity."
In Sun Belt havens such as San Diego, Las Vegas and Phoenix, overzealous construction resulted in a glut of new homes and condos. Real estate experts say sellers and developers there will struggle throughout 2007.
December 14, 2006
Others now joining HP in calling the housing bubble what it was - a classic Ponzi Scheme
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I'm struck buy the quote "The housing market sustained the economy at a time of very large trade deficits. It's been a false prosperity." and how it correlates to this verse in the Bible which illuminates the deception which is intrinsic to money.
"..but the worries of the world, and the deceitfulness of riches, and the desires for other things enter in and choke the word, and it becomes unfruitful."
~ Mark 4:19
How true... how true...
Chuck would be so proud.
For what does it profit a man if he gains the whole world but loses his soul?
I think Jebus reportedly said that.
False prosperity because Walmart sold us out to China.
The USA/Canada/Mexico if unified would be 400,000,000 consumers. The three countries are rich in natural resources and talented hard working people. If all the money invested in China was put into this tri-nation market and into Mexico we wouldn't have a false prosperity as the jobs and money would stay here.
Between Canada, Mexico, the USA, we have quite a bit of oil, coal, gold, silver, forests, oceans, you name it. We don't need globalization and trade with Asia or Europe at the expense of our own national well being.
Invest in the Union of North America and in our people. The faster the dollar drops the sooner our leaders and the population will recognize that we don't need to import from China to be prosperous.
...artificially low interest rates over the past half-decade encouraged China and other exporting nations to purchase 10-year bonds, which kept U.S. mortgage rates low...
could someone explain this statement to me please? why would a low rate of return encourage investment?
Ponzi scheme it was. Anytime you get a significant portion of the purchase price that is attributable purely to the belief that someone else will pay more for it in the future, without any real reference to intrinsic value, you've got yourself a Ponzi scheme.
Sure, real estate has some fundamental value and a portion of the purchase price was for that fundamental value. But there was that huge chunk of premium that people were paying purely because 'prices are going up', because someone else will pay more in the future, not because the home will actually have more 'value' in the future.
Good old Ponzi - what ever happened to him anyway?
HP'ers it's time to start shopping. REO foreclosures are becoming rampant. It has to be a smoking deal though before you pull the trigger.
Listen up folks. China likes things the way they are. They aren't going to worry about it, and neither should we. Helicopter Ben is on the way with y'alls sacks of money as I write this. Fear not, all is well. Free trade is good for Americans. Buy more imported stuff and empty your minds of whimsy.
I'd like to see prices in the bay area and surroundings in California go up another 25% in Q1 of 2007. The reason? so the crash would be even more severe so I can pick and choose by the end of 08 or early 09.
Oh if you want to shop for houses in CA Temecula is starting to get real ugly fast.
Twib, I would distinguish stocks as different since, theoretically, there is underlying intrinsic value in the company which you are purchasing via stock ownership. By owning stock you own the company, fractionally. I say 'fractionally' because you own a fraction of the company and because you own a fraction of the rights which 'ownership' may entail (property being a bundle of rights, privileges and immunities).
That being said, the stock market becomes a ponzi scheme itself when the price of securities exceeds the underlying, fundamental value of them. Nasdac stocks circa 1999 are an example of stocks which had become 'ponzified', if that is a word (if it's not then I'm making it one). Why would anyone want to own a company that makes no profit? Unless you thought, for some irrational reason, that someone else will pay you more for it in the future.
We would get into a long discussion about what I mean by underling, fundamental value and what kind of company ownership you get via securities.
But one could argue that we are in a ponzi period for stocks right now.
Does this make sense? Or do you call 'BS' on this explanation?
Michael,
I can't explain that to you, but I zoomed in on that quote to. It seems to confirm my understanding of mortgage rates... Something I've asked about on here a few other times... Specifically that the FED only has indirect influence over them. So maybe Greenspan is getting too much credit for his part in this. I dunno.
As to your original question... Maybe low rates forced them into less desireable longer bonds to get a better return? I dunno.
that quote showed the ignorance of the reporter
China buying up our 10-year bond caused artificial low interest rates.
Artificial low interest rates didn't cause China to buy our bonds
Those MSM - what are you gonna do with 'em?
Temecula is starting to get real ugly fast.
when was that shithole never ugly?
2 + 2 = 5. That's why U.S. bond rates are so low.
I pleasure myself to the Greater Depression.
I'm worried about running out of porn during my jobless period. Maybe I could swap them for amateur porn from PubeTube or YouTube.
Buzz Kill:
A man goes to the cobbler and buys a new soul.
That's a good one anon.
I wonder if Mr. Ponzi had any idea how famous he would one day become.
Why are all you bloggers wasting your energy commiserating with one another? Why not put your energies into joining forces with Housing Advocacy Groups of all persuasions - and actually DO something to change things??
Do you not realize that this bubble has fundamentally changed the prospect for opportunity in the U.S.? Thanks to the strength of the 'Real Estate Investor Clubs', etc., different markets across the country have been bid up - forever locking out future home buyers who aren't fortunate enough to have inherited or didn't get into the game early enough...
It was recognized by experts on housing in California several years ago that we now have a permanent tenant class - a large and growing group of people who will never be able to become homeowners - unless, of course they are willing to move to much cheaper markets. Yet those same markets have seen their inventory of houses be bid up as well, thanks to investors following the advice of so many Real Estate Gurus. And don't think that they have gone away with the current 'cooling off'. Rather, they are quite alive and well, and coming to a market near you SOON, if they haven't yet been. This, despite the fact that it is virtually impossible to find any properties that 'cash flow' with the desired 10% down.
Long story short - folks, we need to join forces with other people who want to see a return to the concept of a house being fundamentally a home, and not an investment vehicle for the rich, at the expense of those who work hard and play by the rules...
To accomplish this - we need to change our tax laws, first and foremost!! It is INSANE to be encouraging speculation of single family homes (detached, or condos)through the huge tax incentives that our system now allows!! Especially when the rules re:taxes and investment properties are SO easy to 'fudge'.
First thing that needs to go is ANY tax break for investing in a single family home, beyond one's PRIMARY residence. Period. If they need taxes to provide incentives for rental housing then, fine, allow them for MULTI-family housing. Next, we need to revert to the captial gains treatment that existed before 1997. That is, one can exclude the profits on a sale of a primary residence once (ok, maybe twice) in a lifetime. NOT every 2 years!! What were they thinking, when this passed?? (do you suppose that just maybe the NAR was behind this - as one of the largest lobby groups in DC? duh)
Anyway, you get my drift. There are many blog sites out there with a lot of good, angry energy. Let's combine forces and put it to good use PRODUCTIVELY!!!
Dear Buzz Kill,
Don't you mean infamous, like honika jew ski?
So your house has been on the market for 18 months and you just can't figure out why it won't sell? LOWER THE F-ING PRICE! Hurry up with this collapse already.
FYI the old man physicist from the article is from Antioch, CA. Very far from SF and Sacramento but in my neck of the woods. These 45-minutes-away-from-the-city home should have never increased in price this much.
On November 1, 1920, Ponzi pleaded guilty to mail fraud, and was sentenced to five years in federal prison. He was released after three and a half years to face state charges. He was again found guilty and sentenced to nine years. Before entering state prison, Ponzi jumped bail and fled to Florida, where he set up a scam to sell "prime Florida property" to gullible investors. Florida authorities quickly wised to Ponzi's scam. He fled to Texas, where he shaved his head, grew a mustache, and tried to flee the country as a crewman on a merchant ship. He was caught and sent back to Massachusetts to serve out his prison term.
In the meantime, government investigators tried to trace Ponzi's convoluted accounts to figure out how much money he had taken and where it had gone. They never did manage to untangle it, and could only conclude that millions had gone through his hands.
Ponzi was released in 1934 and was immediately deported to Italy since he never had become an American citizen. His flashy confidence had faded by that time, and when he left the prison gates he was met by an angry crowd. He told reporters before he left: "I went looking for trouble, and I found it." Rose stayed behind and later divorced him, as she did not want to leave Boston for his sake. However, they continued to exchange hopeful love letters up until Ponzi's death.
In Italy, Ponzi jumped from scheme to scheme but little came of them. He eventually got a cozy job as the agent for Ala Littoria, the Italian state airline, in Brazil. However, during World War II, the Brazilians, who had sided with the Allies, realized the Italians were using the airline to ship strategic materials and shut it down.
Ponzi spent the last years of his life in poverty. He had a stroke in 1948, and died in a charity hospital in Rio de Janeiro on 18 January 1949. His life had been characterized by one great moment of glory surrounded by outlandish, wild ventures which inevitably lost him money. In the charity hospital, Ponzi granted one last interview to an American reporter, and commented about the wild ride he had given Bostonians: "Even if they never got anything for it, it was cheap at that price. Without malice aforethought I had given them the best show that was ever staged in their territory since the landing of the Pilgrims! It was easily worth fifteen million bucks to watch me put the thing over!"
Dear Buzz Kill,
Don't you mean infamous, like honika jew ski?
Why yes, FMW, that's exactly what I meant, infamous. I somewhat doubt, however, that our resident anti-semite, anti-Mexican, anti-everything honica jewinski falls into that category.
Infamous: OH, your right. Hon Jew is infamous only here at HP my reading and writing compadre'.
But you on the other hand, are an HP ledgend. (:
Flatterer. ;-)
FMW, you might enjoy this and this. (If you haven't read them already, that is)
"In order to play this ponzi scheme, the value of the homes had to go up faster than the economy grew and faster than people could service their debt.
------------
...and faster than their salaries.
Invest in the Union of North America and in our people. The faster the dollar drops the sooner our leaders and the population will recognize that we don't need to import from China to be prosperous.
Thursday, December 14, 2006 8:11:05 PM
are you infavor of the Amero?
Wow, Great Posts Buzz Kill!
Good thing I am not rich.....DOh.
What is a Kitchen Garden? I like his idea of "Stop working." When can I start.
See my post about the Amero on the open thread.
ltr
iw
I'm glad you liked them. I don't necessarily agree with everything put forth on that energy bulletin post but I thought you might find it interesting.
I did read your post on the Amero. It is certainly a plausible theory. The citizens of this country must eventually take back their government and money supply. A general strike might be a good first step.
IMO, things will get much worse before the sheeple wake up to the government corruption, waste, and malfeasance though.
Effoffski
Good chuckle before I go off to the salt mines today.
lolololol
Damn, Italians in those days looked more Mexican than Mexicans.
How did LOW interest rates 'encourage' anybody to buy 10-yr Treasuries? What was the incentive?
Maybe the Chinese bought them, as other central banks have, because it was the better idea.
And perhaps the Chinese authorites have a larger problem. They have to keep people employed, even if the business they work in is some former state-owned monstrosity that even the thugs don't want to steal. The Chinese need to keep people employed even if the employer is submerged in debt they can never repay.
Re: Buying REO's now. I agree, there are some deals out there. But I prefer to wait until there's more to choose from!
Nice to hear others finally calling this bubble a massive fraud, ponzi scheme, whatever.
Time for Americans to wake up. We've been had. There never was a vibrant economy. It was all a sick illusion based on us believing wooden homes were "worth" any price no matter how ridiculous.
Hear hear to the guy with the tax rant. Getting rid of tax incentives towards owning is definitely a step in the right direction.
Page down on this link for a Jewish play, 'Ponzi Man'. He, he.
http://www.worldjewishnewsagency.org/jewish_arts2a.htm
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