Any Thoughts About this "Fix Housing First"?

Question

Anyone see this: Fix Housing First?

Any thoughts?

Dave P. · Answer

Thanks for the link Taz.

Bob Hines · Answer

To take off from Taz, long term average for % that consumer makes up of the economy is around 63%-65% of GDP depending on how/who is measuring.  Since that is an average and we were at 70% or slightly higher recently, the consumer should fall to somewhere between 50%-60% of GDP to balance out the the recent abnormal state.  Unfortunately, instead of just the consumer cutting back to meet this point, the government is hell bent on becoming a larger % all by itself.  Since % is a ratio, I wouldn't be surprised with consumers falling to under 50% of GDP in a year or two if you add additional gov spending and consumers cutting back (saving more/paying off debt) and banks not lending (decreasing the velocity of money).

There are only 2 things that can honestly 'fix' the economy:
1. Time
2. Price

We need time to burn off all the excesses and reload and we need prices to fall back to an affordable level-in many aspects.  Everybody expecting things to bounce back are delusional.  The economy that we have known and lived in for the last 21 years was FAKE.  Instead of building a real economy we borrowed more money to trick us that things were getting better.  Some people talk about 'the next depression', I won't get into a pissing contest about specifics but I will tell you one thing about the great depression is being repeated-people are learning painful lessons.  Banks are learning that they need to be more careful in lending and people are learning that they need to be more careful in borrowing.  It's impossible for the economy to get back to where it was 3 years ago because that was fake, a debt induced fantasy.  Since these lessons have already been learned, I don't see how we can get back to 3 years ago when everybody was oblivious.

I personally look for an L shaped 'readjustment' as I don't like to use the term 'recession' as that implies a temporary blip that will return to the previous state.  I stated 21 years as that points to 1987, not to Reagan but the appointment of Alan Greenspan and his operating the economy like a heroin addict.

If we are in deflation, as I believe we are, each day a dollar is in your pocket it is worth more than the day before.  This is hard to grasp when we have been trained in an inflationary environment where dollars were worth less every day.  Even if you are earning close to 0% on your money in a bank account, you are still gaining value.  The 0.15% I earned on the cash in my retirement account last year out performed the S&P 500 by 40% in 2008.

Dave P. · Answer

I'm starting a new coalition.

It's called "Fix Expectations First".

It's a grass roots organization. I'm hoping to reach out to kids (that live in my house) and teach them that they actually have to "perform" to get paid. The theory is kind of radical, but the basic premise is that you don't actually "deserve" anything for being born (American or otherwise). Anything you "get" is a result of what you "do".

I hope my organization doesn't get flagged by the FBI for being too extreme.

Please don't tell anyone about it.

Account Closed · Answer

David,

Start by having them read The Law by Frederick Bastiat

It should be required reading in high school.

Yeah, I too have a dream.

Tom C · Answer

"You can tell that things have gotten to an INSANE level when the poorest in our society live in their Section 8 (or government) houses and spend their days watching their big screen TVs and talking on their cell phones. IT MAKES ME SICK!"

Mike,

I understand exactly how you feel. Over the summer I did a rehab on a new house. I worked every night after my full time job and every weekend. To get to the house I had to drive through the "bad" parts of town and every day I would watch these good for nothing bums sit on their front porch drinking beer and do nothing. The kids didn't go to school and it seemed like no one ever went to work.

Here we are, my wife and I working full time, then working after work on rehabbing, just trying to make a living, all while these bums sit on their ass's and take our tax money every day. By time I finished with that house, I was sick. Sick of seeing this every day and sick of working our butt's off while they steal our money legally.

Jon Holdman · Answer

Taz is on the right track.  I'd say that in addition, we've just lived through the biggest credit bubble we've ever seen.  Housing is not broken.  It can't be fixed.  What was broken is that easy credit in the aftermath of the dot com bubble created its own, much larger bubble.  Housing was one of the most visible parts, but consumption in general was the hidden iceberg.  Whether oversized Detroit SUVs, Aeropostale shirts, or 75" TVs, all that easy credit drove a huge consumption bubble.

Its not easy to see who's the force behind that web site.  It appears to me that its driven by builders.  Its just another variation on the auto bailout.  These guys don't really give a rat's a** about the economy, any more than the big three executives care about the rank and file jobs.  They just know the bottom has fallen out from underneath their business, and they want it proped up.

The ONLY way we will get the economy  back on track is to do productive work and return to normal credit and spending levels.  That web site is a crock that just advocates a return to the same loose lending that created the bubble in the first place.

Account Closed · Answer

Treating the symptoms as the disease rages on is completely pointless.

In the 1980's about 63% of the US economy was consumer driven, in 2007 it was over 70%. The "problem" everyone now sees is the consumer is tapped out and not spending. Which for the longer term is a very good thing. However, if the contraction in consumer spending happens too fast, the economy goes into a deeper recession or worse.

Yes, we need jobs but not the ones government "creates". We need jobs that actually contribute to the GDP and not just redistribute the wealth. Those come from small businesses and entrepreneurs. You get job growth there when government gets out of their way.

The problem with housing is self correcting once we realize it isn't the disease. The disease is an under educated and under skilled work force who is used to wages that are not in line with their actual value to their employer.

Improving consumer confidence is a start but the consumer can't carry the economy by themselves. Consumer spending should be between 50% and 60% of the economy. Consumers are doing their part by pulling back, the real question is whether government or the private sector will be the ones to fill the void. Since the government is the one controlling that and since we now have a VERY socialist leaning government, I think we have our answer.

This is so shaping up to be like the Carter years times 10.  :roll:

Michael Rossi · Answer

I agree with all the posts above, but would go one step further.  I believe that this crisis has been caused by decades of living a lifestyle that we can't afford - both personally and on a governmental basis.  Both the government and individuals have borrowed money to live this unsustainable lifestyle.  Over the years, we have become a country of entitled victims.  Everyone is entitled to everything:  housing, healthcare, retirement, etc.  You can tell that things have gotten to an INSANE level when the poorest in our society live in their Section 8 (or government) houses and spend their days watching their big screen TVs and talking on their cell phones.  IT MAKES ME SICK!

We've got to get back to the idea that people aren't entitled to ANYTHING.  We don't have the RIGHT to a house; to healthcare; to retirement; to a bigscreen TV; for your business to be successful; to a job; to a minimum wage; etc, etc, etc.

We have the right to life, liberty and the PURSUIT of happiness (meaning that you can work your butt off if you happiness means having a bunch of bling).  If you are too lazy to work, you are free to be happy living under a bridge.

If the founders of our country felt as entitled as we do today - they would have all starved!

Mike

Richard Warren · Answer

I had not seen that.  Had they been able to fix housing six months ago it might have helped,  however, fixing housing now would not be enough.  With unemployment approaching double-digits that is now the number one problem.  Fixing housing doesnâ€™t do any good if people canâ€™t pay for it.  Job creation has to be the number one priority at this point.  Focusing on housing would be like shutting the barn door after the horses have escaped.  Real estate will not get back on track util the economy recovers and the economy wonâ€™t recover until the job situation improves.  An economy is nothing more than money in motion and right now money just isnâ€™t moving.  If people donâ€™t have confidence in the economy or they arenâ€™t secure in their personal financial situation, they will not spend money.  If they donâ€™t spend money the economy stagnates.  Improving consumer confidence index numbers will be a sign that the economy is starting to improve.

:cool: