midtowng's blog

That's not how bubbles work

Robert Shiller, the co-creator of the S&P Case-Shiller Index, which tracks national housing prices, is a man that has earned a great deal of respect for his knowledge of the real estate market. Yet he is still guilty of saying the silliest of things.
For instance, the other day he said, "There could be another bubble...people have gotten very speculative in their attitudes toward housing."

To be fair, Shiller qualified his statement by saying he doesn't think another housing bubble is likely, or will happen soon. Nevertheless, that isn't how bubbles work.

What Recovery? Green Shoots turning into Brown Weeds

Some Green Shoots supporters have declared that the bottom is in. They point towards various short-term trends, and if you don't look too close, it appears to support their cause.
The Green Shoots supporters accuse the Brown Weeds advocates of using charts that are too long, and thus miss the recent movements.

Therefore I've decided to dig up my own charts, looking at just the last month.

Boston Fed: Obama's efforts toward housing "misdirected"

It isn't hard to find news articles claiming that the bottom in housing is in.

Harney notes that “even the most bearish researchers” are saying that home prices are almost at bottom

The problem is when you look at the actual numbers they show something entirely different. For instance, just today, the PMI Mortgage Insurance Company predicts that housing prices will continue to fall for the next two years. These guys aren't exactly a group that likes to spread doom and gloom.

So who is right? Well, let's take a look at today's news.

What Recovery? Consumers and Jobs

I could hardly believe it when I saw this poll come out.

It's a testament to effective public relations that a majority of people believe that they will be better off next summer than they are right now. If perception was all that mattered then the mission of fixing the economy has already been accomplished.

Unfortunately for all of us, actual facts mean more than managing perception. Just ask Baghdad Bob.
With that in mind, let's look at those pesky inconvenient facts.

Progressive solutions to California's economic crisis

A lot of virtual ink has been spilled over the on-going economic crisis in California. Lost in the uproar is the fact that 6 other states are also having budget crisis of their own.

Most ideas for solving California's fiscal situation involve draconian cuts and higher taxes. Both are unavoidable at this late date.
However, in every crisis there is opportunity for more radical, progressive, long-term ideas. I would now like to present an idea for comment.

Unemployed Councils, Eviction Riots, and the New Deal

It was the morning of January 22, 1932, in a quiet, middle-class neighborhood of the Bronx. A crowd was gathering in front of 2302 Olinville Avenue, near the Bronx Park.
City Marshals and Police had moved in to evict 17 tenants who were on a "rent strike". A crowd of 4,000 had gathered nearby.

When the marshals moved into the building and the first stick of furniture appeared on the street, the crowd charged the police and began pummeling them with fists, stones, and sticks, while the "non-combatants urged the belligerents to greater fury with anathemas for capitalism, the police and landlords." The outnumbered police barely held their lines until reinforcements arrived.

Every single reserve police officer in the Bronx had to be called in to prevent being routed by the rioters.

What Recovery? The Myth of "No Other Choice"

Last September, during the debate over the federal bailout of Wall Street, politicians that supported the bailout used a certain phrase.

"Our time has run out," said Rep. Spencer Bachus, R-Ala., the ranking Republican on the House Financial Services Committee. "We're going make a decision. There are no other choices, no other alternatives."

Recently I saw the same argument made on DKos concerning the deficit spending and bailouts. It seems like common knowledge at this point. If we hadn't bailed out Wall Street then we would headed into a Depression.

The fact of the matter is that this idea, that we had no choice, is wrong on three different levels.

What Recovery? Myths, Lies, and Green Shoots

There are those that honestly think you can make a sustainable economy based on people buying things they don't need with money they don't have. Then there are those who just want to sucker in the sheeple so they can fleece them one more time.
Finally, there are the sheeple themselves - so scared that they will buy into any feel-good message about Green Shoots that the politicians and media sells them, and even defend it.

What none of these three groups want is for the general public to know what the actual numbers really are.
They don't want me to show you what I am about to show you.

Unemployment: A Realistic Forecast

If you are out of work like me, and hoping that the Depression will end soon so you can get a job, you better develop a Plan B.

A recent analysis by a trio of economists with the Federal Reserve Bank of San Francisco predicted a jobless recovery on a nationwide basis, following a pattern that appeared after the recessions of the early 1990s and 2001.

Most economic predictions can be taken with a grain of salt. If you were as wrong on your job as often as economists are on their jobs, you would get fired very quickly.
On the other hand, it's common sense to look at recent historical trends and project patterns from them. Given that premise, let's look at what we can expect in terms of employment.

Credit card defaults, bankruptcy reform and backlash

The default rate for credit cards is getting out of hand, and the reform bill should cause it to go even higher.

(Reuters) - U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's (BAC - News) lending portfolio, in another sign that consumers remain under severe stress.
Bank of America Corp -- the largest U.S. bank -- said its default rate, those loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.

The bank is paying the price of expanding rapidly in recent years and of holding one of the highest concentrations of subprime borrowers among the top card issuers, analysts said.