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Old 06-21-2018, 04:28 PM
Danny B Danny B is offline
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Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,482
Hot money in RE

The various CBs created an extra $ 200 trillion. They took impaired loans and put them in a "bad bank". This strategy was supposed to take bad loans off the books of the banks so that they could continue to issue new loans. There was little demand for new credit from people who were credit-worthy. So, they made loans to people who were not credit-worthy.
$200 trillion was just too much to be absorbed into the productive system so, it was circulated in the upper loop of the economy. Unfortunately, much of the money flowed into anything that could be considered a store-of-value. It blew out the price on everything that ran in a short-term cycle. Commodities peaked and crashed. There is one area that has a long-term cycle. Real Estate. The hot money that was conjured up in the upper loop was searching for a home that appeared safe. RE is a long term cycle so, it appeared safe.

Here is a comprehensive article on the price of housing. I’ll do a few excerpts but, you should read the whole thing.
"Since 1960, renters’ median earnings have gone up 5 percent while rents have spiked 61 percent; homeowners earn 50 percent more while home prices have gone up 112 percent.
The Harvard study noted that the cities with the greatest increases in housing costs also have the greatest increases in homelessness. Expensive housing encourages private equity firms and other investors to buy up apartment buildings and evict the current residents.
But wait, it gets worse: The Harvard study found that the fastest rise in home prices is at the low end of the market. “Cheap” homes, or those selling for less than 75 percent of the median price, are appreciating at twice the rate of high-end homes.

The reason for this appears to be that low-cost housing is simply disappearing from the market. Since 1990, more than 2.5 million apartments renting for less than $800 per month have been demolished, upgraded into luxury condos or converted into hotels or offices. Between 2010 and 2017, prices in poor urban neighborhoods rose 50 percent faster than in rich neighborhoods,

"Before the recession, America built around 1.1 million new homes per year. In its best year since, the country built just 849,000. "
VERY strange,, maybe it is because houses are unaffordable.
"America also has a nationwide shortage of construction workers. According to the Harvard report, building firms have 200,000 job openings, the highest number in a decade. And yet, despite persistent labor shortages, construction worker wages are rising slower than the rest of the private sector."
"“In a lot of cities,” he said, “the market can’t supply housing for people making less than six figures.”
"But here, too, the news is grim. In 1988, just one city in America had homes that cost, on average, more than six times the annual median income. Today, 22 of them do. "
Keep in mind that the number of owner occupied houses hasn't gone up in decades. Everything is bought up by speculators who are close the the free-money spigot.

6/21 American cities are so expensive that they risk ‘demographic bomb’ – BI
6/21 LA home prices surge past new record – Patch
6/21 A $24 million tear down on Nantucket? Island prices breaking records – CNBC
6/21 15 US cities where home prices are skyrocketing – CNBC
6/20 Home price insanity: $2.6 million for 900 square feet – CBS

"The headline figure is striking: global debt has hit a new high of 225% of world GDP, exceeding the previous record of 213% in 2009. So, as the IMF points out, there has been no deleveraging at the global level since the 2007-08 financial crisis."
"The IMF’s recommendation to governments is that they should fix the roof while the sun is shining: accumulate a fiscal surplus, or at least reduce deficits,"
Yep, raise the snot out of taxes.
"Since the crisis, far tougher capital requirements have been introduced for banks"
And immediately gutted.
"At a time when economic growth is robust almost everywhere, financial markets are relaxed about debt sustainability."
Growth in the sector of the economy that produces NOTHING is robust.

In the Baaken field they are flaring off natural gas to the tune of 1,800, 000 Bbl. equivalent of oil every day. They don't have the infrastructure to do anything else.
6/21 Fed Chair Powell calls case ‘strong’ for more interest rate hikes – CNBC
6/21 Americans still aren’t saving, despite the booming economy – Bloomberg
I'm glad to hear that everything is booming. Before long, we are going to hear one BIG BOOM.
The feces-for-brains at the FED look at the extremely low unemployment rate and conclude that the economy is close to overheating. The 95 million Americans of working age who are not in the labor force evidently isn't an important consideration. They just want to raise rates to attract capital inflows AND save the pension funds. So, what can we expect for results?
"With over $50 trillion in non financial domestic debt, every 100 basis point ( 1/10 of a percent ) increase in rates produces a $500 billion economic drag."
So, 2/10s of a percent rise will extract and extra $1trillion in debt service. The FED is raising rates to try to accumulate "ammunition" to fight the next recession. This isn't ammunition that they are accumulating. It is "fissionable" debt that they are stacking up in one place. It is increasing at the rate of $1.5 trillion a year. At some point, it will reach critical mass.

The FED funds rate has been dropping in tandem with the birth rate. This is all tied to the consumptive rate of the 16---62 year olds.

Keep in mind that all GOV is socialist. They attract the corrupt and, the non-producers. They never reduce their predations. Good article.
Global debt in real time.
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