[ltokuda]

I think falling interest rates will have a very limited effect. I think the bigger issue these days is the down payment. When home prices were rising, home owners could sell their house and use the profits as a big down payment on a bigger house. Now that house prices are dropping, the supply of down payments is shrinking as well. My guess is that the money supply is shrinking at a much faster rate than the lowering of interest rates can compensate for.

On top of that, tighter lending standards are demanding a higher percentage down payment. So even though interest rates have been dropping, the cost of securing a loan has been going up.

Of course, I’m just talking about this on a macro level. I’m sure there are situations out there where a bank loan will get approved based on the lower interest rate, but would have gotten rejected otherwise. There’s always going to be cases like that. For those people a 0.5% interest rate cut might make all the difference in the world. House prices will fall just a little less quickly because of it. But I just don’t see it making a huge difference overall.

[ltokuda]

I think falling interest rates will have a very limited effect. I think the bigger issue these days is the down payment. When home prices were rising, home owners could sell their house and use the profits as a big down payment on a bigger house. Now that house prices are dropping, the supply of down payments is shrinking as well. My guess is that the money supply is shrinking at a much faster rate than the lowering of interest rates can compensate for.

On top of that, tighter lending standards are demanding a higher percentage down payment. So even though interest rates have been dropping, the cost of securing a loan has been going up.

Of course, I’m just talking about this on a macro level. I’m sure there are situations out there where a bank loan will get approved based on the lower interest rate, but would have gotten rejected otherwise. There’s always going to be cases like that. For those people a 0.5% interest rate cut might make all the difference in the world. House prices will fall just a little less quickly because of it. But I just don’t see it making a huge difference overall.

[ltokuda]

Unfortunately, McCain has already endorsed a massive bailout for the irresponsible. He endorsed the $30 billion dollar bail out of BSC and the $200 billion bail out of the big investment banks. No matter which candidate you vote for, you’re going to be bailing out some group of speculators.

Do you want to bail out guys like the CEO of BSC, who sold all his shares yesterday for $61 million dollars when they should have been worth zero? Or do you want to bail out homeowners who bet on prices going up forever? Pick your charity.

[ltokuda]

Unfortunately, McCain has already endorsed a massive bailout for the irresponsible. He endorsed the $30 billion dollar bail out of BSC and the $200 billion bail out of the big investment banks. No matter which candidate you vote for, you’re going to be bailing out some group of speculators.

Do you want to bail out guys like the CEO of BSC, who sold all his shares yesterday for $61 million dollars when they should have been worth zero? Or do you want to bail out homeowners who bet on prices going up forever? Pick your charity.

[ltokuda]

Unfortunately, McCain has already endorsed a massive bailout for the irresponsible. He endorsed the $30 billion dollar bail out of BSC and the $200 billion bail out of the big investment banks. No matter which candidate you vote for, you’re going to be bailing out some group of speculators.

Do you want to bail out guys like the CEO of BSC, who sold all his shares yesterday for $61 million dollars when they should have been worth zero? Or do you want to bail out homeowners who bet on prices going up forever? Pick your charity.

[ltokuda]

Unfortunately, McCain has already endorsed a massive bailout for the irresponsible. He endorsed the $30 billion dollar bail out of BSC and the $200 billion bail out of the big investment banks. No matter which candidate you vote for, you’re going to be bailing out some group of speculators.

Do you want to bail out guys like the CEO of BSC, who sold all his shares yesterday for $61 million dollars when they should have been worth zero? Or do you want to bail out homeowners who bet on prices going up forever? Pick your charity.

[ltokuda]

Unfortunately, McCain has already endorsed a massive bailout for the irresponsible. He endorsed the $30 billion dollar bail out of BSC and the $200 billion bail out of the big investment banks. No matter which candidate you vote for, you’re going to be bailing out some group of speculators.

Do you want to bail out guys like the CEO of BSC, who sold all his shares yesterday for $61 million dollars when they should have been worth zero? Or do you want to bail out homeowners who bet on prices going up forever? Pick your charity.

[ltokuda]

The CEO of BSC just sold all of his stock for $61 million. He can thank the US tax payer for bailing him out … otherwise, his stock would have been worth zero. Its good to see that our hard earned money is going to help the needy.

[ltokuda]

The CEO of BSC just sold all of his stock for $61 million. He can thank the US tax payer for bailing him out … otherwise, his stock would have been worth zero. Its good to see that our hard earned money is going to help the needy.

[ltokuda]

The CEO of BSC just sold all of his stock for $61 million. He can thank the US tax payer for bailing him out … otherwise, his stock would have been worth zero. Its good to see that our hard earned money is going to help the needy.

[ltokuda]

The CEO of BSC just sold all of his stock for $61 million. He can thank the US tax payer for bailing him out … otherwise, his stock would have been worth zero. Its good to see that our hard earned money is going to help the needy.

[ltokuda]

The CEO of BSC just sold all of his stock for $61 million. He can thank the US tax payer for bailing him out … otherwise, his stock would have been worth zero. Its good to see that our hard earned money is going to help the needy.

[ltokuda]

Josh, thanks for the great explaination on your views of inflation. I’m still trying to get my head around it but your posts have been a big help. There’s one part of your post that I’m a little unclear about:

“If that borrowing is put to productive use, its not inflationary. Say I borrow money to build a factory which then improves productive output or fosters competition. That doesn’t tend to be inflationary.”

“However if I borrow money and pour ever more of it into something like housing, where the population is growing slowly or not at all, that becomes inflationary as ever more dollars chase ever fewer, or stagnant amount of resources.”

When you use the term “inflationary” above, are you actually talking about prices going up (rather than money in the system)? That seems to make sense to me. Here’s my interpretation of it:

It seems like once you borrow money, then you’ve added to the amount of money in the system. That, in itself is inflation. But if you use that money to produce products, then you’ve added another source of competition for the consumer’s money. This added competition for the consumer’s money tends to balance out the additional money supply. So that’s why this type of inflation doesn’t tend to drive up prices?

If you borrow money and buy a house with it, you’re also adding money to the system. This is also inflation. But buying a house doesn’t produce any products that consumers want. There is no additional competition for the consumer’s money. This imbalance leads to prices going up?

Do I have it right?

Regards,
ltokuda

[ltokuda]

Josh, thanks for the great explaination on your views of inflation. I’m still trying to get my head around it but your posts have been a big help. There’s one part of your post that I’m a little unclear about:

“If that borrowing is put to productive use, its not inflationary. Say I borrow money to build a factory which then improves productive output or fosters competition. That doesn’t tend to be inflationary.”

“However if I borrow money and pour ever more of it into something like housing, where the population is growing slowly or not at all, that becomes inflationary as ever more dollars chase ever fewer, or stagnant amount of resources.”

When you use the term “inflationary” above, are you actually talking about prices going up (rather than money in the system)? That seems to make sense to me. Here’s my interpretation of it:

It seems like once you borrow money, then you’ve added to the amount of money in the system. That, in itself is inflation. But if you use that money to produce products, then you’ve added another source of competition for the consumer’s money. This added competition for the consumer’s money tends to balance out the additional money supply. So that’s why this type of inflation doesn’t tend to drive up prices?

If you borrow money and buy a house with it, you’re also adding money to the system. This is also inflation. But buying a house doesn’t produce any products that consumers want. There is no additional competition for the consumer’s money. This imbalance leads to prices going up?

Do I have it right?

Regards,
ltokuda

[ltokuda]

Josh, thanks for the great explaination on your views of inflation. I’m still trying to get my head around it but your posts have been a big help. There’s one part of your post that I’m a little unclear about:

“If that borrowing is put to productive use, its not inflationary. Say I borrow money to build a factory which then improves productive output or fosters competition. That doesn’t tend to be inflationary.”

“However if I borrow money and pour ever more of it into something like housing, where the population is growing slowly or not at all, that becomes inflationary as ever more dollars chase ever fewer, or stagnant amount of resources.”

When you use the term “inflationary” above, are you actually talking about prices going up (rather than money in the system)? That seems to make sense to me. Here’s my interpretation of it:

It seems like once you borrow money, then you’ve added to the amount of money in the system. That, in itself is inflation. But if you use that money to produce products, then you’ve added another source of competition for the consumer’s money. This added competition for the consumer’s money tends to balance out the additional money supply. So that’s why this type of inflation doesn’t tend to drive up prices?

If you borrow money and buy a house with it, you’re also adding money to the system. This is also inflation. But buying a house doesn’t produce any products that consumers want. There is no additional competition for the consumer’s money. This imbalance leads to prices going up?

Do I have it right?

Regards,
ltokuda

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