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2008-09-28 Home Front Economy

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Posted by Besoeker 2008-09-28 00:00|| || Front Page|| [1 views ] Top

#1 Sadly, this surprises not a single solitary soul.

Posted by Mike N. 2008-09-28 00:22|| 2008-09-28 00:22|| Front Page Top

#2 Well, maybe there won't be any profits realized on the sale of troubled assets -- real estate has been so grossly overpriced it must fall further, and this may happen to MBS (mortgage backed securities also).

Posted by Anguper Hupomosing9418 2008-09-28 00:24|| 2008-09-28 00:24|| Front Page Top

#3 The price of housing became so much higher than housing's actual value as a result of two things:

1. The home mortagage interest deduction, which in effect makes real estate (at least two homes' worth) a taz-subsidized investment and

2. An interest rate which was held artificially low (vs the true cost of borrowing) for about 10 years too long.

In the absence of these two things, the attitudes and events and legislation that led up to this mess would probably not have happened.

Posted by no mo uro 2008-09-28 06:46|| 2008-09-28 06:46|| Front Page Top

#4 'tax', not 'taz', PIMF.

Posted by no mo uro 2008-09-28 06:46|| 2008-09-28 06:46|| Front Page Top

#5 nmu,

mortgage interest has been tax deductible since the inception of the current income tax in 1913. So the problem it creates is not a recent one and it is difficult to assign it any specific responsibility for this crisis to it.

Your point about interest rates is more appropriate as the Federal Reserve, also established in 1913, kept interest rates far too low far too long. Greenspan's reputation will be as the worst Fed Chairman since Miller.

Posted by Nimble Spemble 2008-09-28 08:21|| 2008-09-28 08:21|| Front Page Top

#6 Re-Seeding the Housing Mess

Much too late in the growing season. A long cold winter approaches. PLOW THE FAILED CROP UNDER!

Posted by Besoeker 2008-09-28 08:24|| 2008-09-28 08:24|| Front Page Top

#7 Agreed on the history of HMID, NS, but the fact of the matter is that making real estate an investment which is federally subsidized in a way that other investments are not has altered the real estate - and mortgage - market in ways that prevented market forces from working as efficiently as they might have otherwise.

In the absence of other factors, it was never enough of an intrusion to do more than artificially elevate the price of real estate with respect to the value of stocks, bonds, commodities, etc. But adding everything else, including foolishly tweaked interest rates, made it suddenly loom large.

Posted by no mo uro 2008-09-28 09:36|| 2008-09-28 09:36|| Front Page Top

#8 This is a great time for winter wheat, winter rye, etc., Besoeker.

There must be a pertinent analogy in there somewhere.

Posted by no mo uro 2008-09-28 09:37|| 2008-09-28 09:37|| Front Page Top

#9 It aint gonna be good, I'll tell you that much. Not for buyers or sellers.

Posted by bigjim-ky 2008-09-28 10:20|| 2008-09-28 10:20|| Front Page Top

#10 I agree the tax subsidy drove up prices.

But adding everything else, including foolishly tweaked interest rates, made it suddenly loom large.

I don't see how you can make this statement our of clear air. The everything else caused the problem, not the inflated, subsidized price which had been consistently subsidized for 90 years.

Posted by Nimble Spemble 2008-09-28 10:48|| 2008-09-28 10:48|| Front Page Top

#11 Thought the Conservative Republicans in the House forced the removal of the ACORN provision or horse-swapped for the restrictions on CEO golden parachutes. Any way it is cut, it is not going to end for a long, long time and I can't see where are not going to ultimately foot the bill.

Posted by JohnQC 2008-09-28 10:58|| 2008-09-28 10:58|| Front Page Top

#12 It was the gradual removal of reserve requirements down to next to nothing that allowed the credit bubble to form.

When you halve the reserve ratio, you double the amount of credit.

As there are now no reserves left, then you cannot manoeuvre them down to cope with a recession. I've been worried by the credit bubble since 2003, so it takes a lot longer to kill the economy than I thought!

Posted by Bright Pebbles 2008-09-28 11:01|| 2008-09-28 11:01|| Front Page Top

#13 The reductions in the reserve ratio is definitely the big problem, and without that this crunch may never be. And if you buy a house for the going market price, but that price is 20% higher than the house value, then, you buy debt. You gamble. Some houses sold for 30 to 50% above real value. No doubt American educated college grads bought them. Now, if they could get that job...

Posted by lollypop 2008-09-28 13:47|| 2008-09-28 13:47|| Front Page Top

#14 "The everything else caused the problem, not the inflated, subsidized price which had been consistently subsidized for 90 years."

Fair enough.

Posted by no mo uro 2008-09-28 17:46|| 2008-09-28 17:46|| Front Page Top

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