The housing bubble is over!

[Eugene]

Nominal incomes will have to go up sooner or later; you can’t dissociate incomes from commodity prices or consumer prices.

Average nominal incomes can’t go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you’re paid with has to come from somewhere. If the amount of money in the economy is constant, some consumer prices may go up, but others will have to come down to compensate.

And why would nominal incomes go up in todays environment? It only makes sense to raise someone’s wages if there is competition for his labor/skills. In some skilled fields like programming, you might have competition because outsourcing and offshoring become more expensive. (On the other hand, global demand for programmers might fall!) In a wider picture, we have rising unemployment in the country, and dollar must fall a lot further before it starts to make sense to hire unskilled and poorly educated American Joe Sixpacks instead of unskilled and uneducated Indonesians to make shoes and toys.

[kev374]

Kev,

I recommend you look up “monetary illusion” in any ECON 101 textbook before writing silly replies. The fact we get paid in debased dollars is part of the problem, as our standard of living will surely deteriorate.

If our currency is debased that makes inflation go up, our imports cost more. How does that make the bubble over? That actually makes the situation worse. Affordability comes down and the buyer can afford LESS not MORE house. That puts downward pressure on house prices.

It is NOT Inflation that make current house price levels more acceptable but **INCOME inflation**. If your income stays the same and there is 50% inflation over the next 3 years do you think that 500k house today is going to be more affordable in 3 yrs? I don’t think so!!! Everyone would become paupers and nobody would be able to afford even a shack…at least now we can buy a shack!

So..inflation puts huge downward pressures on housing prices if income doesn’t keep pace with inflation which it insn’t doing of late.

[kev374]

Kev,

I recommend you look up “monetary illusion” in any ECON 101 textbook before writing silly replies. The fact we get paid in debased dollars is part of the problem, as our standard of living will surely deteriorate.

If our currency is debased that makes inflation go up, our imports cost more. How does that make the bubble over? That actually makes the situation worse. Affordability comes down and the buyer can afford LESS not MORE house. That puts downward pressure on house prices.

It is NOT Inflation that make current house price levels more acceptable but **INCOME inflation**. If your income stays the same and there is 50% inflation over the next 3 years do you think that 500k house today is going to be more affordable in 3 yrs? I don’t think so!!! Everyone would become paupers and nobody would be able to afford even a shack…at least now we can buy a shack!

So..inflation puts huge downward pressures on housing prices if income doesn’t keep pace with inflation which it insn’t doing of late.

[kev374]

Kev,

I recommend you look up “monetary illusion” in any ECON 101 textbook before writing silly replies. The fact we get paid in debased dollars is part of the problem, as our standard of living will surely deteriorate.

If our currency is debased that makes inflation go up, our imports cost more. How does that make the bubble over? That actually makes the situation worse. Affordability comes down and the buyer can afford LESS not MORE house. That puts downward pressure on house prices.

It is NOT Inflation that make current house price levels more acceptable but **INCOME inflation**. If your income stays the same and there is 50% inflation over the next 3 years do you think that 500k house today is going to be more affordable in 3 yrs? I don’t think so!!! Everyone would become paupers and nobody would be able to afford even a shack…at least now we can buy a shack!

So..inflation puts huge downward pressures on housing prices if income doesn’t keep pace with inflation which it insn’t doing of late.

[kev374]

Kev,

I recommend you look up “monetary illusion” in any ECON 101 textbook before writing silly replies. The fact we get paid in debased dollars is part of the problem, as our standard of living will surely deteriorate.

If our currency is debased that makes inflation go up, our imports cost more. How does that make the bubble over? That actually makes the situation worse. Affordability comes down and the buyer can afford LESS not MORE house. That puts downward pressure on house prices.

It is NOT Inflation that make current house price levels more acceptable but **INCOME inflation**. If your income stays the same and there is 50% inflation over the next 3 years do you think that 500k house today is going to be more affordable in 3 yrs? I don’t think so!!! Everyone would become paupers and nobody would be able to afford even a shack…at least now we can buy a shack!

So..inflation puts huge downward pressures on housing prices if income doesn’t keep pace with inflation which it insn’t doing of late.

[kev374]

Kev,

I recommend you look up “monetary illusion” in any ECON 101 textbook before writing silly replies. The fact we get paid in debased dollars is part of the problem, as our standard of living will surely deteriorate.

If our currency is debased that makes inflation go up, our imports cost more. How does that make the bubble over? That actually makes the situation worse. Affordability comes down and the buyer can afford LESS not MORE house. That puts downward pressure on house prices.

It is NOT Inflation that make current house price levels more acceptable but **INCOME inflation**. If your income stays the same and there is 50% inflation over the next 3 years do you think that 500k house today is going to be more affordable in 3 yrs? I don’t think so!!! Everyone would become paupers and nobody would be able to afford even a shack…at least now we can buy a shack!

So..inflation puts huge downward pressures on housing prices if income doesn’t keep pace with inflation which it insn’t doing of late.

[cr]

Diego, I just realized that myself. It should be just 72%, which is still a far cry from what incomes have done.

You might be able to make a better case for a gold bubble, than home prices being at bottom.

Inflation affects all of the above, but if anything it’s mitigating the decreases as the Fed prints and lends more money. The fact that despite inflation home prices are still falling 20%/yr nationally is telling.

You can’t inflate your way out of a bubble. The bubble popped, and the Fed is still trying to keep it full of hot air. They are failing.

[cr]

Diego, I just realized that myself. It should be just 72%, which is still a far cry from what incomes have done.

You might be able to make a better case for a gold bubble, than home prices being at bottom.

Inflation affects all of the above, but if anything it’s mitigating the decreases as the Fed prints and lends more money. The fact that despite inflation home prices are still falling 20%/yr nationally is telling.

You can’t inflate your way out of a bubble. The bubble popped, and the Fed is still trying to keep it full of hot air. They are failing.

[cr]

Diego, I just realized that myself. It should be just 72%, which is still a far cry from what incomes have done.

You might be able to make a better case for a gold bubble, than home prices being at bottom.

Inflation affects all of the above, but if anything it’s mitigating the decreases as the Fed prints and lends more money. The fact that despite inflation home prices are still falling 20%/yr nationally is telling.

You can’t inflate your way out of a bubble. The bubble popped, and the Fed is still trying to keep it full of hot air. They are failing.

[cr]

Diego, I just realized that myself. It should be just 72%, which is still a far cry from what incomes have done.

You might be able to make a better case for a gold bubble, than home prices being at bottom.

Inflation affects all of the above, but if anything it’s mitigating the decreases as the Fed prints and lends more money. The fact that despite inflation home prices are still falling 20%/yr nationally is telling.

You can’t inflate your way out of a bubble. The bubble popped, and the Fed is still trying to keep it full of hot air. They are failing.

[cr]

Diego, I just realized that myself. It should be just 72%, which is still a far cry from what incomes have done.

You might be able to make a better case for a gold bubble, than home prices being at bottom.

Inflation affects all of the above, but if anything it’s mitigating the decreases as the Fed prints and lends more money. The fact that despite inflation home prices are still falling 20%/yr nationally is telling.

You can’t inflate your way out of a bubble. The bubble popped, and the Fed is still trying to keep it full of hot air. They are failing.

[Diego Mamani]

one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

–You're considering only variable costs, my friend. There are fixed costs too: store's rent (or the opportunity cost if you own), insurance, etc. Anyways, thanks for the entertainment and going into the minutiae of burger selling. I could have said "$300 airfare" or "$0.75 pen", etc.

Average nominal incomes can't go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you're paid with has to come from somewhere. If the amount of money in the economy is constant (…)

–Aha! You assume that the money supply is constant. Now your burger example starts to make more sense. But that's an enormous IF you use. The metaphorical printing presses are working at full steam! Haven't you read the news this week? For instance, see:

http://www.csmonitor.com/2008/0313/p01s06-usec.html

 

[Diego Mamani]

one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

–You're considering only variable costs, my friend. There are fixed costs too: store's rent (or the opportunity cost if you own), insurance, etc. Anyways, thanks for the entertainment and going into the minutiae of burger selling. I could have said "$300 airfare" or "$0.75 pen", etc.

Average nominal incomes can't go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you're paid with has to come from somewhere. If the amount of money in the economy is constant (…)

–Aha! You assume that the money supply is constant. Now your burger example starts to make more sense. But that's an enormous IF you use. The metaphorical printing presses are working at full steam! Haven't you read the news this week? For instance, see:

http://www.csmonitor.com/2008/0313/p01s06-usec.html

 

[Diego Mamani]

one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

–You're considering only variable costs, my friend. There are fixed costs too: store's rent (or the opportunity cost if you own), insurance, etc. Anyways, thanks for the entertainment and going into the minutiae of burger selling. I could have said "$300 airfare" or "$0.75 pen", etc.

Average nominal incomes can't go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you're paid with has to come from somewhere. If the amount of money in the economy is constant (…)

–Aha! You assume that the money supply is constant. Now your burger example starts to make more sense. But that's an enormous IF you use. The metaphorical printing presses are working at full steam! Haven't you read the news this week? For instance, see:

http://www.csmonitor.com/2008/0313/p01s06-usec.html

 

[Diego Mamani]

one burger contains as much as 3-5c worth of flour (up from 1-2c in 2006!) 5c of cheese, 5c of beef, some lettuce and mustard, etc. The bulk is LABOR.

–You're considering only variable costs, my friend. There are fixed costs too: store's rent (or the opportunity cost if you own), insurance, etc. Anyways, thanks for the entertainment and going into the minutiae of burger selling. I could have said "$300 airfare" or "$0.75 pen", etc.

Average nominal incomes can't go up unless either the money supply goes up (printing) or the rate at which people trade (velocity of money) goes up. Money you're paid with has to come from somewhere. If the amount of money in the economy is constant (…)

–Aha! You assume that the money supply is constant. Now your burger example starts to make more sense. But that's an enormous IF you use. The metaphorical printing presses are working at full steam! Haven't you read the news this week? For instance, see:

http://www.csmonitor.com/2008/0313/p01s06-usec.html

 

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