The housing bubble is over!

[Diego Mamani]

bsrsharma is right when stating “One way the Fed is helping to solve our severe indebtedness is through inflation (…)”

Equalizer: I think that bsrsharma understood my argument right away and then re-phrased it very cogently. Where I don’t agree with him is that he appears to see this policy as a positive. For those of us who are not debtors, who save compulsively and pay taxes, that inflationary policy is mistaken. It’ll do more harm than good, unless one is a FB or a bank holding too much toxic paper.

[Diego Mamani]

I wish I had the reference, but I saw recently that the median income is actually *down* since 2000. And thats the fundamental re: housing prices.

Kewp: I’m glad you brought that up, as it illustrates the confusion between nominal incomes (measured in current dollars) and real incomes (adjusted for inflation). It is real incomes that probably shrunk since 2000, especially for less skilled workers.

Going back to the original post. Suppose the family who bough the $407 house in 2001 had a $65 income. Seven years later, the house could be $700K and the family’s income $112K. You’re going to say “no way! that’s too high a salary.” The point I’m trying to make, and that brsharma reiterated, is that with the current Fed policies, gasoline could be $4.50 or $6.00, a box of cereal sell for $10, and a gallon of milk sell for $9. Then the $112 income doesn’t sound too good, right?

Thi family is in fact worse off in 2008 than in 2001 b/c of inflation. In real terms their income is actually smaller. And because of the high inflation $700K doesn’t seem too high because the 2008 dollars are worth far less than in 2001.

Again, I don’t think we have reached the bottom in housing prices, but we’re very close to it. I wished housing would have corrected by only price drops. Prices have dropped, yes, but unfortunately, the Fed is achieving a huge chunk of the correction by debasing the dollar (by using inflation).

[Diego Mamani]

I wish I had the reference, but I saw recently that the median income is actually *down* since 2000. And thats the fundamental re: housing prices.

Kewp: I’m glad you brought that up, as it illustrates the confusion between nominal incomes (measured in current dollars) and real incomes (adjusted for inflation). It is real incomes that probably shrunk since 2000, especially for less skilled workers.

Going back to the original post. Suppose the family who bough the $407 house in 2001 had a $65 income. Seven years later, the house could be $700K and the family’s income $112K. You’re going to say “no way! that’s too high a salary.” The point I’m trying to make, and that brsharma reiterated, is that with the current Fed policies, gasoline could be $4.50 or $6.00, a box of cereal sell for $10, and a gallon of milk sell for $9. Then the $112 income doesn’t sound too good, right?

Thi family is in fact worse off in 2008 than in 2001 b/c of inflation. In real terms their income is actually smaller. And because of the high inflation $700K doesn’t seem too high because the 2008 dollars are worth far less than in 2001.

Again, I don’t think we have reached the bottom in housing prices, but we’re very close to it. I wished housing would have corrected by only price drops. Prices have dropped, yes, but unfortunately, the Fed is achieving a huge chunk of the correction by debasing the dollar (by using inflation).

[Diego Mamani]

I wish I had the reference, but I saw recently that the median income is actually *down* since 2000. And thats the fundamental re: housing prices.

Kewp: I’m glad you brought that up, as it illustrates the confusion between nominal incomes (measured in current dollars) and real incomes (adjusted for inflation). It is real incomes that probably shrunk since 2000, especially for less skilled workers.

Going back to the original post. Suppose the family who bough the $407 house in 2001 had a $65 income. Seven years later, the house could be $700K and the family’s income $112K. You’re going to say “no way! that’s too high a salary.” The point I’m trying to make, and that brsharma reiterated, is that with the current Fed policies, gasoline could be $4.50 or $6.00, a box of cereal sell for $10, and a gallon of milk sell for $9. Then the $112 income doesn’t sound too good, right?

Thi family is in fact worse off in 2008 than in 2001 b/c of inflation. In real terms their income is actually smaller. And because of the high inflation $700K doesn’t seem too high because the 2008 dollars are worth far less than in 2001.

Again, I don’t think we have reached the bottom in housing prices, but we’re very close to it. I wished housing would have corrected by only price drops. Prices have dropped, yes, but unfortunately, the Fed is achieving a huge chunk of the correction by debasing the dollar (by using inflation).

[Diego Mamani]

I wish I had the reference, but I saw recently that the median income is actually *down* since 2000. And thats the fundamental re: housing prices.

Kewp: I’m glad you brought that up, as it illustrates the confusion between nominal incomes (measured in current dollars) and real incomes (adjusted for inflation). It is real incomes that probably shrunk since 2000, especially for less skilled workers.

Going back to the original post. Suppose the family who bough the $407 house in 2001 had a $65 income. Seven years later, the house could be $700K and the family’s income $112K. You’re going to say “no way! that’s too high a salary.” The point I’m trying to make, and that brsharma reiterated, is that with the current Fed policies, gasoline could be $4.50 or $6.00, a box of cereal sell for $10, and a gallon of milk sell for $9. Then the $112 income doesn’t sound too good, right?

Thi family is in fact worse off in 2008 than in 2001 b/c of inflation. In real terms their income is actually smaller. And because of the high inflation $700K doesn’t seem too high because the 2008 dollars are worth far less than in 2001.

Again, I don’t think we have reached the bottom in housing prices, but we’re very close to it. I wished housing would have corrected by only price drops. Prices have dropped, yes, but unfortunately, the Fed is achieving a huge chunk of the correction by debasing the dollar (by using inflation).

[Diego Mamani]

I wish I had the reference, but I saw recently that the median income is actually *down* since 2000. And thats the fundamental re: housing prices.

Kewp: I’m glad you brought that up, as it illustrates the confusion between nominal incomes (measured in current dollars) and real incomes (adjusted for inflation). It is real incomes that probably shrunk since 2000, especially for less skilled workers.

Going back to the original post. Suppose the family who bough the $407 house in 2001 had a $65 income. Seven years later, the house could be $700K and the family’s income $112K. You’re going to say “no way! that’s too high a salary.” The point I’m trying to make, and that brsharma reiterated, is that with the current Fed policies, gasoline could be $4.50 or $6.00, a box of cereal sell for $10, and a gallon of milk sell for $9. Then the $112 income doesn’t sound too good, right?

Thi family is in fact worse off in 2008 than in 2001 b/c of inflation. In real terms their income is actually smaller. And because of the high inflation $700K doesn’t seem too high because the 2008 dollars are worth far less than in 2001.

Again, I don’t think we have reached the bottom in housing prices, but we’re very close to it. I wished housing would have corrected by only price drops. Prices have dropped, yes, but unfortunately, the Fed is achieving a huge chunk of the correction by debasing the dollar (by using inflation).

[Diego Mamani]

Why pick euros instead of dollars when dollars IS the currency in the US of A?

People like you give the Fed a free ride. So, for you, no matter how much liquidity the Fed pumps into the system, a buck is a buck, $10 in 2001 are worth the same to you as $10 in 2008, even if oil has cuadrupled and gold tripled? Supply and demand, my friend: the more plentiful dollars are, the less value they have. What I found on this thread is that people can’t comprehend that dollars can be valued in a metric other than dollars, and that there can be too many dollars for them to keep their value.

You approach to money is what we call “monetary illusion.” $10 are not the same as another $10 unless both are at the same time and place. This is how we got into the stagflation mess of the 1970s, there was a widespread belief that a little more money, and little more inflation would grease the economy’s wheels and we would all be happy. It didn’t happen. We had inflation and low growth.

When people realized that $15 didn’t have the same purchasing power as $10 a few years back, then things started to unravel: producers started to increase prices routinely and consumers cut back. The current loose monteray policies are taking us back to that 70s scenario.

[Diego Mamani]

Why pick euros instead of dollars when dollars IS the currency in the US of A?

People like you give the Fed a free ride. So, for you, no matter how much liquidity the Fed pumps into the system, a buck is a buck, $10 in 2001 are worth the same to you as $10 in 2008, even if oil has cuadrupled and gold tripled? Supply and demand, my friend: the more plentiful dollars are, the less value they have. What I found on this thread is that people can’t comprehend that dollars can be valued in a metric other than dollars, and that there can be too many dollars for them to keep their value.

You approach to money is what we call “monetary illusion.” $10 are not the same as another $10 unless both are at the same time and place. This is how we got into the stagflation mess of the 1970s, there was a widespread belief that a little more money, and little more inflation would grease the economy’s wheels and we would all be happy. It didn’t happen. We had inflation and low growth.

When people realized that $15 didn’t have the same purchasing power as $10 a few years back, then things started to unravel: producers started to increase prices routinely and consumers cut back. The current loose monteray policies are taking us back to that 70s scenario.

[Diego Mamani]

Why pick euros instead of dollars when dollars IS the currency in the US of A?

People like you give the Fed a free ride. So, for you, no matter how much liquidity the Fed pumps into the system, a buck is a buck, $10 in 2001 are worth the same to you as $10 in 2008, even if oil has cuadrupled and gold tripled? Supply and demand, my friend: the more plentiful dollars are, the less value they have. What I found on this thread is that people can’t comprehend that dollars can be valued in a metric other than dollars, and that there can be too many dollars for them to keep their value.

You approach to money is what we call “monetary illusion.” $10 are not the same as another $10 unless both are at the same time and place. This is how we got into the stagflation mess of the 1970s, there was a widespread belief that a little more money, and little more inflation would grease the economy’s wheels and we would all be happy. It didn’t happen. We had inflation and low growth.

When people realized that $15 didn’t have the same purchasing power as $10 a few years back, then things started to unravel: producers started to increase prices routinely and consumers cut back. The current loose monteray policies are taking us back to that 70s scenario.

[Diego Mamani]

Why pick euros instead of dollars when dollars IS the currency in the US of A?

People like you give the Fed a free ride. So, for you, no matter how much liquidity the Fed pumps into the system, a buck is a buck, $10 in 2001 are worth the same to you as $10 in 2008, even if oil has cuadrupled and gold tripled? Supply and demand, my friend: the more plentiful dollars are, the less value they have. What I found on this thread is that people can’t comprehend that dollars can be valued in a metric other than dollars, and that there can be too many dollars for them to keep their value.

You approach to money is what we call “monetary illusion.” $10 are not the same as another $10 unless both are at the same time and place. This is how we got into the stagflation mess of the 1970s, there was a widespread belief that a little more money, and little more inflation would grease the economy’s wheels and we would all be happy. It didn’t happen. We had inflation and low growth.

When people realized that $15 didn’t have the same purchasing power as $10 a few years back, then things started to unravel: producers started to increase prices routinely and consumers cut back. The current loose monteray policies are taking us back to that 70s scenario.

[Diego Mamani]

Why pick euros instead of dollars when dollars IS the currency in the US of A?

People like you give the Fed a free ride. So, for you, no matter how much liquidity the Fed pumps into the system, a buck is a buck, $10 in 2001 are worth the same to you as $10 in 2008, even if oil has cuadrupled and gold tripled? Supply and demand, my friend: the more plentiful dollars are, the less value they have. What I found on this thread is that people can’t comprehend that dollars can be valued in a metric other than dollars, and that there can be too many dollars for them to keep their value.

You approach to money is what we call “monetary illusion.” $10 are not the same as another $10 unless both are at the same time and place. This is how we got into the stagflation mess of the 1970s, there was a widespread belief that a little more money, and little more inflation would grease the economy’s wheels and we would all be happy. It didn’t happen. We had inflation and low growth.

When people realized that $15 didn’t have the same purchasing power as $10 a few years back, then things started to unravel: producers started to increase prices routinely and consumers cut back. The current loose monteray policies are taking us back to that 70s scenario.

[cr]

Prices will still fall.

http://data.bls.gov/cgi-bin/cpicalc.pl

[cr]

Prices will still fall.

http://data.bls.gov/cgi-bin/cpicalc.pl

[cr]

Prices will still fall.

http://data.bls.gov/cgi-bin/cpicalc.pl

[cr]

Prices will still fall.

http://data.bls.gov/cgi-bin/cpicalc.pl

[Author]

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