What are your thoughts? Housing going UP or DOWN?

[jpinpb]

Rich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)

So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.

While the government is printing a great amount of money, I don’t think it’s being all circulated. Maybe people are buying gold w/it or paying off credit cards or hoarding it in mattresses. I don’t know. Printing money is different than actually getting it circulated. They can print 24/7, but if people don’t have it in their hands and spend it, then how is printing going to help?

For instance, giving the few thousand in tax credits as stimulus would probably get people to spend. But contrast people were spending tens of thousand, hundreds of thousands extracted from their house during the bubble.

Yes, the government is taking on projects. I think this is just going to be less money to the people as they’ll have to pay for the projects through eventual taxation. But that’s another issue for another day.

Maybe we are in that lag period you mention. How long does lag time normally last? Months? Years? True that people *need* to spend money to live, but it is quite different than splurging on unnnecessary *wants*. That’s what was happening during the bubble. And frankly, during the depression, people still needed to live and money wasn’t there to spend. But different economic policies then, I guess.

I understand the money is there – somewhere. Where it went is like a mystery to me. Banks just holding it? Because few are lending the credit on real estate purchases. It’s mostly government FHA.

As being discussed on another thread, consumer index collapsed. It can’t be for lack of government printing.

While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)

So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?

I admit rudimentary knowledge on this topic. Just
my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.

Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.

[capeman]

Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.

[capeman]

Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.

[capeman]

Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.

[capeman]

Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.

[capeman]

Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.

[scaredyclassic]

I guess I can see this in terms of housing. When prices dropped from a million to a half million, I as a potential buyer had more potential money available, right. Instead of putting x down and having a y payment I only put 1/2 x down and have a 1/2 y payment to make. I have a lot more money …. But only theoretically in the future and only if I buy. What about when stock or housing markets plummet and become relatively illiquid? Isn’t wealth destroyed then. There may not always be a buyer. A whole suburb could become unsaleable… Or maybe just too much housing

[scaredyclassic]

I guess I can see this in terms of housing. When prices dropped from a million to a half million, I as a potential buyer had more potential money available, right. Instead of putting x down and having a y payment I only put 1/2 x down and have a 1/2 y payment to make. I have a lot more money …. But only theoretically in the future and only if I buy. What about when stock or housing markets plummet and become relatively illiquid? Isn’t wealth destroyed then. There may not always be a buyer. A whole suburb could become unsaleable… Or maybe just too much housing

[scaredyclassic]

I guess I can see this in terms of housing. When prices dropped from a million to a half million, I as a potential buyer had more potential money available, right. Instead of putting x down and having a y payment I only put 1/2 x down and have a 1/2 y payment to make. I have a lot more money …. But only theoretically in the future and only if I buy. What about when stock or housing markets plummet and become relatively illiquid? Isn’t wealth destroyed then. There may not always be a buyer. A whole suburb could become unsaleable… Or maybe just too much housing

[scaredyclassic]

I guess I can see this in terms of housing. When prices dropped from a million to a half million, I as a potential buyer had more potential money available, right. Instead of putting x down and having a y payment I only put 1/2 x down and have a 1/2 y payment to make. I have a lot more money …. But only theoretically in the future and only if I buy. What about when stock or housing markets plummet and become relatively illiquid? Isn’t wealth destroyed then. There may not always be a buyer. A whole suburb could become unsaleable… Or maybe just too much housing

[scaredyclassic]

I guess I can see this in terms of housing. When prices dropped from a million to a half million, I as a potential buyer had more potential money available, right. Instead of putting x down and having a y payment I only put 1/2 x down and have a 1/2 y payment to make. I have a lot more money …. But only theoretically in the future and only if I buy. What about when stock or housing markets plummet and become relatively illiquid? Isn’t wealth destroyed then. There may not always be a buyer. A whole suburb could become unsaleable… Or maybe just too much housing

[scaredyclassic]

Also stocks can and do go to zero. Isn’t money destroyed then? What if things get so bad that starts happening a lot

[scaredyclassic]

Also stocks can and do go to zero. Isn’t money destroyed then? What if things get so bad that starts happening a lot

[scaredyclassic]

Also stocks can and do go to zero. Isn’t money destroyed then? What if things get so bad that starts happening a lot

[scaredyclassic]

Also stocks can and do go to zero. Isn’t money destroyed then? What if things get so bad that starts happening a lot

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