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The Basement
Gibson raided
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<blockquote data-quote="John Roberts" data-source="post: 39197" data-attributes="member: 126"><p>Re: Gibson raided</p><p></p><p></p><p></p><p>There has to be actual consumer wealth to support a given level of spending (demand) or that demand will collapse when the consumer exhausts their personal credit limit. We just saw what happens when personal wealth and personal credit availability collapses. The demand funded by the imaginary wealth created by the housing bubble disappeared, and the rest of the economy suffered. The economic puppet masters who like to tweak the marginal numbers, play games like mailing checks to tax payers for them to hopefully spend and boost the economy, but this is just more short term manipulation and doesn't change long term trends. Priming the pump doesn't matter if the well is dry. </p><p></p><p>In terms of your service business, you could extend unlimited credit to your customers and demand would increase, but for how long? How do you pay your new employees if your customers don't pay you? </p><p></p><p>We are still in a painful readjustment dominated IMO by housing wealth contraction. There are still active attempts to artificially stimulate housing values, for the positive impact this would have on the larger economy, but it's not nice to fool mother nature, so IMO we will all be better served to let these markets find their true bottom and then from that solid foundation they can return to the historical trend of increasing home prices over time. We still have a significant housing inventory imbalance to work through, before normal household formation can support reasonable levels of new home building.</p><p></p><p>I wouldn't dismiss some creative solutions for ways to clear this excess housing inventory, but they need to be economically sound. Suing banks to prevent foreclosures only delays any realistic settlement. I have heard talk of government programs to rent out these homes which sounds to me like asking for (more) trouble. Something that sounds more economically reasonable to me, is perhaps linking some form of accelerated citizenship opportunity for qualified (legal) immigrants already on waiting lists that can afford to put 20% or some reasonable down payment on an empty (or any) home. Clearing up this inventory overhang would have a ripple effect on the entire economy as private real wealth and consumer buying power would stop falling and begin increasing again. Note: I have been watching home prices relative to inflation adjusted long term price trends for several years and we are getting closer to long term trend lines after years of painful reversing out of bubble gains, but we still have a little ways to go. (This varies between local markets so some are already bottomed, while others are still falling). </p><p></p><p>My scheme is too simple to be that easy, but it sounds better to me than many ideas I hear in the press. Of course it would require legislation, so would never get through the DC meat grinder, that is clearly in short term election mode. </p><p></p><p>Note: There is some debate over what is a healthy savings vs. spending rate. I don't think anyone would accuse US consumers of saving too much money. While perhaps prolonging the current short term pain, I consider increased personal savings a healthy trend. The savings are not dead money as bank deposits are available to be lent out (multiple times) and personal investments in the stock market provide capital directly to private business to fund growth. </p><p></p><p>JR</p></blockquote><p></p>
[QUOTE="John Roberts, post: 39197, member: 126"] Re: Gibson raided There has to be actual consumer wealth to support a given level of spending (demand) or that demand will collapse when the consumer exhausts their personal credit limit. We just saw what happens when personal wealth and personal credit availability collapses. The demand funded by the imaginary wealth created by the housing bubble disappeared, and the rest of the economy suffered. The economic puppet masters who like to tweak the marginal numbers, play games like mailing checks to tax payers for them to hopefully spend and boost the economy, but this is just more short term manipulation and doesn't change long term trends. Priming the pump doesn't matter if the well is dry. In terms of your service business, you could extend unlimited credit to your customers and demand would increase, but for how long? How do you pay your new employees if your customers don't pay you? We are still in a painful readjustment dominated IMO by housing wealth contraction. There are still active attempts to artificially stimulate housing values, for the positive impact this would have on the larger economy, but it's not nice to fool mother nature, so IMO we will all be better served to let these markets find their true bottom and then from that solid foundation they can return to the historical trend of increasing home prices over time. We still have a significant housing inventory imbalance to work through, before normal household formation can support reasonable levels of new home building. I wouldn't dismiss some creative solutions for ways to clear this excess housing inventory, but they need to be economically sound. Suing banks to prevent foreclosures only delays any realistic settlement. I have heard talk of government programs to rent out these homes which sounds to me like asking for (more) trouble. Something that sounds more economically reasonable to me, is perhaps linking some form of accelerated citizenship opportunity for qualified (legal) immigrants already on waiting lists that can afford to put 20% or some reasonable down payment on an empty (or any) home. Clearing up this inventory overhang would have a ripple effect on the entire economy as private real wealth and consumer buying power would stop falling and begin increasing again. Note: I have been watching home prices relative to inflation adjusted long term price trends for several years and we are getting closer to long term trend lines after years of painful reversing out of bubble gains, but we still have a little ways to go. (This varies between local markets so some are already bottomed, while others are still falling). My scheme is too simple to be that easy, but it sounds better to me than many ideas I hear in the press. Of course it would require legislation, so would never get through the DC meat grinder, that is clearly in short term election mode. Note: There is some debate over what is a healthy savings vs. spending rate. I don't think anyone would accuse US consumers of saving too much money. While perhaps prolonging the current short term pain, I consider increased personal savings a healthy trend. The savings are not dead money as bank deposits are available to be lent out (multiple times) and personal investments in the stock market provide capital directly to private business to fund growth. JR [/QUOTE]
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