syruppy

Tax Talk and the Economy

George Walker Bush, Machiavelli's president? He's certainly been tortured enough by the DeMedici!

The Fed is Deflating: 10 Reasons Why

I agree with jankynoname. When it comes to housing prices, while some on the margins have been caught up some inconvenience due to their own "irrational exuberance," mostly only some irrational expectations have really undergone some serious revaluation.

For example: Assume Buyer purchases a home in the 2000s for $550K, after house prices already have been rising steadily since 1996. At the time of the purchase, Buyer thinks, e.g., "I'm probably the last purchaser before house prices fall ... but, I need a house." House prices continue to rise and Buyer feels comfortable investing $150K in the house.

Buyer retires and wants to move, so the home is put on the market in 2007 for more than $1.7M. The market has changed and the home does not sell. Buyer continues to live in the home and lowers the price of the home to $1.5M in 2008, although that still is not low enough to attract a buyer in the housing market.

Question: Extrapolating the above $200K decrease in the listing price of the home to the entire market, have housing prices in the Buyer's region really suffered a serious deflation in value? Should the entire economy go into the tank because the irrational expectation "bubbles" of a relative few number of home-sellers have been pricked?

The Fed is Deflating: 10 Reasons Why

I am not certain we should be calling what has happened in housing a "bubble." Corruption, yes; bubble ... no!

Unlike the Dutch tulip mania of 1634-37 that drove prices for a substantially similar and ephemeral commodity to unsustainable heights, housing was not a bubble begging to burst; maybe just deflate a wee bit--for now--before getting a second wind.

Similarly, the dot-com bubble smelled a lot like the ephemeral tulip bulb of Dutch-daze when it burst in 1999-2000.

Homes, however, offer obvious tangible and psychic value. I think everyone probably knows that, given a burgeoning and dynamic society (full employment, increased productivity, a growing economy), the unsustainable housing prices of yesterday probably will seem a lot less heady in a few to perhaps a dozen years down the road.

What is missing from the housing debacle--which is more a story of too much, too quick, instead of too much ever--is a villain. We've got the usual credit criminals, facilitators and enablers that are always more than happy to feed on a something-for-nothing society, whenever the opportunity arises. They will serve to time and the politicians are actually lining up to reward these dysfunctional societal behaviors, even as they roast all of our gooses.

There is no Charles Keating or Michael Miliken to whip like a rented mule, to throw in jail for their perfidy, to crucify for the sins of a something-for-nothing society that always seems to be in the market for new morals and ethics at cheap prices.

It is time for business investment to keep the economic wheels of fortune turning. We can expect no help from government unless it wishes to lower taxes, create ITCs, de-federalize the economy, and deflate government bureaucracy.

For people with more than ethics in their pockets, it's time to smell the roses: cash is dead, long live the cash!