Dr. Housing Bubble Interview


9 Responses to “Dr. Housing Bubble Interview”

  1. Anonymous says:

    Once upon a time those who promised bread and circuses had to provide actual bread and circuses!

    The business cycle:
    real estate bubble +10 years
    other stuff bubble +10 years
    repeat ad nauseum

    Well thought-out libertarianism, but how do you propose the sh*t-work get done, or even long-distance roads?

  2. burbed says:

    My site is basically Real Homes of Genius every day.

    This is generally considered to be the pinacle of listings:


    But just the daily listings tend to be pretty outrageous.

    Gotta love Silicon Valley!

  3. Another Aaron says:

    I’m not quite following that, Elfspice, could you explain it one more time, but a little bit more indepth?

    • Antinous says:

      I’m not quite following that, Elfspice, could you explain it one more time, but a little bit more indepth?

      Just be glad that it wasn’t Entspice. He’d still be introducing himself.

  4. Another Aaron says:

    Oh, I just cracked up. I’m no good for the rest of the day.

  5. Man On Pink Corner says:

    Here we have the staunchest of the free market fundamentalist who derided regulation getting the comeuppance of their own philosophy. In fact, even in the early stages of the formation of the bailout bill you still saw this desire to keep things privatized. It was the ultimate form of crony capitalism. That is, we’ll socialize your losses and privative your profits. You can’t do that without compromising your actual belief. This is 26+ years in the making here. This is simply the logical extension of the crony capitalistic wild west. The market simply followed the lead of the government. Why look at your income or any down payment? Who cares! Free market for everyone.

    Small voice, crying in the wilderness: “Government-backed mortgage lending, which is what we have in this country, is nothing that even remotely resembles a ‘free market.’”

  6. Rick says:

    I see Richard learned some HTML pretty darn pronto. Good.

    As to Dr Housing Bubble, excellent comments. People like him, and really, there are many that have written about this over the years, put the lie on the much louder pundits and journalists who spend their time parroting back BS spouted by politicians and influential crooks of many stripes. It is no big mystery that the most phenomenal real estate bubble of the past half century (at least) caused huge damage when it popped, especially when it was helped along with all manner of deranged financing.

    I too am a leaser, though I don’t own property anywhere. For a lot less money and risk, I can live in a far better neighborhood than I can buy into. Dumping my money into a black hole? Owning your house is far from a sure bet in the medium and long term. There is a large variety of good and bad possible outcomes.

    I agree with the notion that home prices are dropping towards more realistic levels, although I don’t see them coming down to anything reasonable in coastal California anytime soon. Today’s million-dollar homes in the SF bay area should really be back in the $300-400K range (in many cases even less), but that would be cataclysmic for current property- and mortgage-owners.

    I also agree with the oft-repeated meme that those who were too stupid to avoid taking on laughably unrealistic mortgages are now clamoring to be rewarded for their idiocy. Those of us who were more prudent, will receive nothing.

    Both McCain and Obama are pandering to the weepy violins of the electorate by claiming that it is worthwhile to save these people from losing their homes. These people would be far better off if they lost them. They would immediately become renters, and their monthly housing costs would drop significantly. They could declare bankruptcy, and their finances would recover over the following few years. The foreclosed house would be auctioned off, and money would be lost by whoever was stupid enough to buy the securitized loans. They, too, should go bankrupt, and FDIC or some other agency should seize their assets and auction them off.

    The costs should be borne by those who took the greatest risks, not by those of us who had nothing to do with it. I resent the meme that is going around claiming that we all somehow share the blame. Wrong. Not all of us were in the game.

    I could go on, but won’t.

  7. Ernunnos says:

    In many cases countries don’t come out from these ordeals stronger and better. More commonly they come out with less freedoms and quite a few people dead from war, disease, and starvation. I think we have the potential to come out stronger and better, but there’s no guarantee that hardship will lead to these things. It depends on wise choices by good stewards in positions of power. We don’t have good stewards in positions of power, and I see no evidence we’ll be getting any in the next election.

    Be prepared for more interference in your personal life in the name of “economic stability”, much like the PATRIOT act was passed in the name of “security”. Be prepared for more dog-and-pony shows to distract the populace, and pray that none of them take the form of war. Be prepared to have your wealth – or what remains of it – to be transferred to those with political pull.

  8. elfspice says:

    I’ve been very keenly following events and relating it to the historical context of these events. My view is that usury, this mortgage business, as a means of regulating money supply to keep pace with the overall level of economic activity has been well and truly proven over and over in the last 100 years or so to be ineffective.

    My view is that this is because it places the power to create arbitrary amounts of leverage on money, as it is the Federal Reserve Bank only has to hold 10% of it’s money in actual currency, in the hands of people who are in love with money and the power it gives them, and who are inevitably going to push the profit margin up until the disparity between real value and market price becomes over-stretched and is then forced to spring back usually at least as far below the real value as it was pushed above it.

    As this guy’s articles say, the price of property is at the root of this issue, and banks have been encouraging property speculation with easier loans, which drives up prices through increased demand and increased amounts of money flowing into that segment of the economy. Eventually a point comes where too many people are defaulting or paying off the loans slower and more inconsistently, which then lead to people attempting to exploit this supply of bad debts to create whitewashed shiny bonds with overly optimistic growth potentials.

    I personally think that the system needs to change.

    Barter gave way to currency, which enabled the the greater utilisation of resources (in droughts enabling importation and in gluts enabling the development of secondary products from surplus) and improving an economy’s resilience to fluctuations of supply and demand for goods and services. Currency, usually made from a relatively scarce but not rare material, however, suffers from the problem of supply fluctuations that it helped solve in the rest of economies, resulting in droughts and gluts of currency supply, which can have extremely detrimental effects, and can be artificially caused by the producers of the currency base material slowing down production or speeding it up, aggressively exploiting new sources or sitting on them in order to inflate the value of the resource.

    Currency eventually gave way to paper money with the appearance of the first banks, it took some several thousand years, but around the 1600s the people who were in the business of protecting people’s gold and other precious items started issuing certificates to redeem the gold, and not long afterwards governments stepped in and regulated the banking business, spawning the legal industry through the use of contracts (a gold redemption certificate is a contract promised to the bearer to exchange the certificate for gold). Unlike commodified currency value bearers, paper money has virtually unlimited supply potential and brings up the problem of the rate of issue of new currency.

    Until the middle of the 20th century paper currency remained as a certificate of value exchangeable with gold. At the same time as the certificates appeared, bankers, who had been illegally offering interest attracting loans (Christian nations all had laws against usury) had their shady business legitimised around the same time as gold certificates became common, and regulation had to be put in place to rein in the greed factor for this business of lending that resulted inevitably in drastic fluctuations of money supply periodically causing discontent in the populace and often resulting in kings being assasinated, since government is all about reining in the human tendency to escalate deception and theft the longer it is not prosecuted.

    Centralising the banking system didn’t ultimately work, however, because the greedy big players at the top prefer to be in control than have national governments dictate to them, and in the early 20th century all national central banks were signed into private hands, along with the reserve banking system, which, rather than meaning banks must hold surpluses of currency above the amount on the books as loans, that they can loan 10x as much money as they actually have in their vaults, and the large majority of the 90% of money existing only on a ledger is in mortgages, which usually do not ever have to be converted to cash except through the process of repayment.

    This money is not real money. The IMF operates the same way as the fed, which operates the same way as the smaller banks down the line. The IMF and world bank, essentially, are in control of money supply, and has ultimate control over everyone’s money. We are expected to trust them with regulating the issuance of new money, they are supposed to maintain inflation within a narrow range but even though the international central bank may be operating relatively effective regulation of inflation, every single lender it supplies loans to down the line tacks on it’s own margins, and tries to find ways to get more people in debt to them and paying the money back.

    So we are back at square one with a commodified currency system, albeit intangible, where instead of the weather determining the annual production it is in the hands of the community of usurers whose primary motivation is profit, who gain from fluctuating supply deliberately, as when some major segment of the economy bubbles way out of scale with real value, the rates of foreclosure rise and firstly, banks get full title to the land of lenders who were unable to bear the repayments, and when the prices bottom out, usually underpriced due to the climate of fear, the big players snap up these bargains and further strengthen their position.

    My personal view is that the solution is to eliminate human control of money supply and instead institute a fixed inflation rate that is given to all instead of funnelled into the banks via the asymmetric transaction called a loan (all forms of property crime are asymmetric transactions, one should note). Such an economic system would be free of the problems caused by supply and demand fluctuations and the temptation to arbitrage and speculate upon inflation in the form of usury. It could eliminate the need for welfare systems as everyone’s accounts would grow at a fixed linear rate which would be sufficient for an averagely skilled person to survive without actually doing any work. It would also smooth out production growth curves by limiting economic growth to the fixed rate.

    Some time ago I read an article in a local paper about the prices of housing in 1901 in Australia compared to today. A three bedroom house on a 1/8th-1/4 acre in 1901 had an average rental rate of around AUD$65/wk in today’s money, which is in stark contrast to current prices, which are more like 300-400/wk. I don’t know what the inflation was like back in 1901, nor whether the demand for property was up or down on the average of the years before and after, but that still sounds to me like during the 20th century the bank loan/mortgage system has pushed property prices up almost by a factor of 6. If property was priced at 1/6th of current prices most people would be able to buy them outright, or pay them off in 5-10 years rather than 25 years.

    Regarding the theory of locking money supply to a set rate, this does not mean that the amount of money in an economy grows at a fixed rate – instead, it grows at the rate of growth of account holders, indexing inflation directly against population. Since an economy basically is the collective output of all of the members participating in it, the rate of inflation should be fixed against population growth rates.

    Usury is the wrong answer to the question of money supply. It is inevitably going to be made illegal again when it brings the human race to the brink of extinction in high tech warfare and technologically enhanced fascism. Nobody is in control of the economy really, because there’s so many people in the banking system and they all have differing opinions about margin levels and what level of inflation is ok and what is not and the fads of fiscal policy.

    Alternative currencies are springing up all over the place as discontent with the banking system continues to grow. It is only my opinion that a fixed growth rate applied to all accounts in an economy eliminates the ‘business cycle’ as it has not been used in a real economy anywhere. However, I feel that the logic of tying money supply to population levels is self-evident and I hope that the idea gains at least enough currency to be put into a simulation or better still implemented as an electronic currency system. I have a design which uses distributed networking and data redundancy, as well as cryptographic methods, and is based on the accumulation of certificates of transactions, added and subtracted from the balance growth that dates back to the initial opening of an account.

    I should add the disclaimer that I am pretty much libertarian in my political leanings, and I would like to see governments, taxation, the banking system and standing armies abolished. It is my view that the dominant political forces (backed up by military force) are no different from each other in one very important aspect – they believe that intervention and interference is how you solve problems, in other words, by force, hence the use of that word and it’s synonyms in the legal systems and even the names of their organisational units.

    I believe that problems are solved by the natural forces within a system being allowed to operate unimpeded, and I have plenty to back up that view in the form of the simple fact that we are even sitting here now at all – simple laws of economy operate in all levels of the ecology around us – and that it was this, the combination of fluctuating supply and demand of space, building materials, food and water, combined with the need to innovate driven by neccessity, this way of doing things has such a long track record that anyone who thinks that these mainstream systems of manipulating people to fit into ideas rather than the obverse, is just a short early stage in human development that is about to end.

    it’s understandable that we got so full of ourselves being so clever compared to the world around us that we could make tools and change the world in ways that no previous organism could. The ecology created by the combination of human brains and digital computation and networking is far more fluid and adaptable than any physical ecology, and eventually will prove to be the undoing of the systems of control. Just like how a world dominated by reptiles dependent on external heat sources gave way to warm blooded animals when things cooled down, the landscape of the human ecology is becoming increasingly unfavourable for the dinosaurs of centralisation and hierachic organisation, and increasingly favourable for a much more fluid and interconnected system that exploits equilibrium rather than trying to dictate to equilbrium what the middle point should be.

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