skip to Main Content
thehousingbubble@gmail.com

We Are Going To Run Out Of Money And We’ll Have To Sell Everything And We’ll Have Nothing Left

A report from the Times Colonist in Canada. “Rental properties vacated by students who have returned to their home town or native country; property owners who, faced with a shortage of international tourists this summer, put short-term vacation rental suites on the long-term market. Monthly rent for a two-bedroom unit in Victoria dropped to $1,800 in April, down 10% compared with March, according to Rentals.ca. Prices dropped more in Vancouver, according to the report, with a 15% drop for a two-bedroom unit.”

“Property owners struggling to cover a mortgage without tourist dollars are more likely to put a unit up for sale, said Debra Sheets, a member of the Greater Victoria Short Term Rental Alliance. She has seen six units in the Janion, which is zoned for short-term rentals, listed for sale. Sheets said the lack of tourists is just one more challenge faced by short-term rental owners, who are already hit with the speculation tax, commercial taxes similar to hotels and a $1,500 City of Victoria business licence fee. Sheets is also concerned that municipalities could follow the Town of Sidney’s steps to ban short-term rentals.”

The Times of London on the UK. “What will happen to London house prices next — will there be a house price crash in the capital? Henry Pryor, an independent buying agent, believes that prices will move downwards far faster. ‘If you think that house prices are going to be the same in the second half of 2020 as they were in the first quarter, that’s for those who believe in Father Christmas,’ he says. ‘Over the next six months, at all rungs of the housing ladder you will have more people who have to sell than have to buy.'”

“Certain parts of London will be harder hit than others. ‘I wouldn’t want to be the owner of a shiny flat in a high-rise block strung out along the River Thames. I suspect that a flat that was once worth £1.5 million is today £900,000,’ Pryor says.”

From Enab Baladi on Syria. “Citizens of northern Homs countryside were unable to rehabilitate their destroyed houses; therefore, most of them offer their houses for sale, thus causing an oversupply in the property market. In an interview with Enab Baladi, Mazen Maarati, a resident of Kafr Laha town of al-Houla Plain, northern Homs countryside, said that his house was completely destroyed after a barrel bomb was dropped on it, in mid-2014.”

“Maarati added, ‘At that time, I sold the wreckage of my destroyed house to the crushers because I was unable to rebuild it, and I wanted to build a new house on my farm, which is a bit far from the city center. My house has been on the market for nearly three years, without a possible buyer,’ said Maarati.”

“Although house prices have increased significantly amidst the stagnant residential market in the region, they have not reached to match houses’ construction costs. The selling price of a house whose current construction cost is worth 15 million (SYP = 8,241 USD) does not exceed ten million (SYP = 5,494 USD).”

The South China Morning Post. “Hong Kong’s homebuyers came off the sidelines to nibble at more than 200 flats offered at two projects, as developers slashed prices to end nine consecutive weeks of sales flops. Sun Hung Kai Properties, the city’s most valuable developer, managed to sell 162 of 200 flats, or 80 per cent of units offered in the first batch of the second phase of its Wetland Seasons Park project in Tin Shui Wai after cutting prices by up to 18 per cent.”

“The city’s property sales flopped for the sixth time in nine weeks last weekend, as investors find themselves spoilt for choices while the residential real estate market slumps under a combination of a supply glut and recessionary woes.”

From ABC News in Australia. “Westpac has pledged to extend borrowers’ interest-only periods after WA Senator Dean Smith criticised the industry for failing to support landlords, many of whom are self-funded retirees, who were struggling with higher repayments due to their loans switching to principal and interest. For Adelaide couple Dianne and Brian McShane, whose loans are with a different bank, Westpac’s statement offered little hope.”

“The self-funded retirees were already struggling with their loan repayments before coronavirus hit and now their tenants on the Gold Coast have had to break their lease due to the pandemic. Ms McShane, a former administrative assistant, and her husband, an ex-electrician, started investing in property 20 years ago to try to fund their retirement. They currently have three investment properties, two in Queensland and one in Western Australia.”

“But instead of earning an income from them, the couple in their 60s are paying $9,000 a month to the bank to cover their loans, which switched from interest-only to principal and interest last year. Mr McShane said the couple were running out of funds and would ultimately be forced to sell in the falling housing market.”

“‘There will come a day when we are going to run out of money because we are paying all this principal and we’ll have to sell everything, and we’ll have nothing left,’ he said. ‘And we’ll have to rely on the pension. And that’s the reason why we invested in property — we didn’t want to be a burden.'”

“Sydney investor Mike Scotland, a former school teacher, owes $1.1 million to the banks and is in a similar predicament. Mr Scotland has six investment properties and all the loans have switched to principal and interest. ‘The rationale was that there is no way to gain wealth in Australia unless you invent a better mousetrap, win the lottery, have a brilliant business or maybe you do a bit of investment,’ he said. ‘People think property investors are multi-millionaires but probably about 40 per cent of them never make a profit. They’re not rich, fat cats, they’re just people trying to get ahead for the most part.'”

“He envisaged he would have to sell in eight or nine months’ time, at a loss. ‘So I’m heading towards a deadline, I’m heading towards a cliff,’ he said.”

From Stuff New Zealand. “Owners of holiday rentals are slashing their rates hoping to attract Kiwi guests while New Zealand’s borders remain closed. Overnight stays in homes and rooms advertised on platforms such as Airbnb have fallen steeply in price as large numbers sit empty. Sarah Liddell lists a three-bedroom property on the site of her own Queenstown home on Airbnb, and manages listing for other owners. Airbnb bookings has ‘just died’ with the lockdown, Liddell said.”

“Kelvin Davidson, senior property economist with CoreLogic, said Airbnb homes had popped up on the long-term rental market, and some owners were starting to inquire about selling. Davidson said it was too early to know whether to expect an increase in mortgagee sales. ‘That’s normally a last resort, and banks don’t want it. But there’ll be pressure on investors, especially if you own a business you have to shore up when the loan repayment holiday ends and the wage subsidy runs out.'”

This Post Has 88 Comments
  1. Citizens of northern Homs countryside were unable to rehabilitate their destroyed houses; therefore, most of them offer their houses for sale

    The new fixer upper

    1. The new fixer upper
      Dumping a vacant lot full of wreckage is a step below “starting from scratch”.

  2. People think property investors are multi-millionaires but probably about 40 per cent of them never make a profit. They’re not rich, fat cats, they’re just people trying to get ahead for the most part

    I’ll bet they wouldn’t stop bragging when prices were rising quickly, while they showed off their new BMW.

    1. When they are bragging they are promoting. The industry gets lots of free promotion from all of this bragging. And when they stop their bragging the promotion comes to a halt.

      These braggers are seen as being the Smartest Guys In The Room because by promoting their real estate gains they are promoting themselves. Others who want to join the ranks of these Smartest Guys In The Room tend to pay close attention to what they are saying, hanging on every word. The Smartest Guys like this and thus the bragging continues, intensifies. Hence the promotion of real estate continues, intensifies.

      And then there is a downturn in real estate and the bragging morphs into silence and hence the promotion ceases. Without promotion the downturn intensifies, and this intensification converts the status of The Smartest Guys In The Room to something that resembles a bunch of fools.

      At least this is my read, part of it at least. FWIW.

        1. A lot of C-suiters got paid a lot (had a large share of America’s private sector wealth) transferred to them as a result of all the “shareholder value” they created.

          Funny how pay never retreated to pre-1995 levels when that fallacy was exposed. Instead the federal government re-inflated asset values and thus increased inequality.

          Note how the politicians are now objecting to bailed out companies buying back stock and paying dividends, as if those two were the same. The dividends go to ordinary investors. The stock buybacks are used to offset the stock grants those on boards give to each other. The C-suiters want to stop paying dividends, and blame Congress.

  3. Owners of holiday rentals are slashing their rates hoping to attract Kiwi guests while New Zealand’s borders remain closed.

    Why would I go out of town, spend money I don’t have, when the country is locked down and there’s nothing to do? I can do nothing just fine from home.

    1. Queenstown is cool. Just ignore the giant sucking sound, that of your wallet being emptied.

  4. Seattle Airbnb mini empire builders. Their ship has sailed. They gambled at the housing casino. Wow. I bet they have financed everything. The furnishings, the money for cleaning crew. They are fooked.
    https://www.seattlevacationhome.com/
    Trying to get these rented out quickly. Here’s one.
    https://hotpads.com/1882-24th-ave-e-seattle-wa-98112-1n4jkws/pad?border=false&furnished=true&lat=47.6311&lon=-122.3364&z=14
    “WHO WE ARE/HOW WE WORK:This home is offered by Seattle Vacation Home, for rental ranging from 1 to 12 months, either furnished or unfurnished. Rent is determined based on the start and end dates of your lease. The rent displayed in this listing is the “last minute” pricing for the next 30 days. Utilities will be priced into leases under 6 months, and will be paid based on actual usage for leases 6 months and longer. “

    1. Seattle has one good month for vacationers: August. A good college friend grew up in the area and my mother lived in Vancouver, BC for a few years. Seasonal affective disorder (SAD) is very real.

      1. Years ago I attended a 3 day Microsoft conference in the Seattle area.

        It was raining when the airplane landed.
        It was raining the whole time I was there.
        It was raining when airplane took off.

        That would have made for a mighty fine vacation.

      2. Yes, there *can* be some lovely weather there. I’ve spent time there in the summer. I’ve also been there at other times when it was anything but lovely! Cold, wet, and miserable, not lovely.

    2. Any renter considering signing a lease for these former STR properties better factor in the distinct possibility that the property will be foreclosed on, or the flopped real estate non-mogul landlord will be forced to sell it out from underneath them. Price risk accordingly.

  5. CR8R

    “What will happen to London house prices next — will there be a house price crash in the capital? Henry Pryor, an independent buying agent, believes that prices will move downwards far faster. ‘If you think that house prices are going to be the same in the second half of 2020 as they were in the first quarter, that’s for those who believe in Father Christmas,’ he says. ‘Over the next six months, at all rungs of the housing ladder you will have more people who have to sell than have to buy.’”

    1. Talk about bubble town: wages are subpar, taxes are sky high and real estate prices were out of this world.

      ‘Over the next six months, at all rungs of the housing ladder you will have more people who have to sell than have to buy.’

      Have to buy? Who has to buy’? Want to buy, perhaps, but have to buy?

      1. From what I’ve gathered, there is a class of people that “has to be” in a house. Renting is anathema to them, they believe it is the equivalent of throwing money into a fireplace. Buying is smart and responsible because you are building equity (never mind closing costs, which can be quite a pretty penny, and carrying costs – interest, taxes, insurance, maintenance, utilities). Basically, these are people I think who are unfamiliar with the use of a spreadsheet so they cannot actually calculate these things. Which is probably most people. 65 percent of people have mortgages or own outright, and 35 percent do not.

        Depending on the costs, there are good arguments to be made either way – but it’s depending of the costs of both renting and buying that determines which is the lower cost way to go, it’s not always one is better than the other. If it takes one ten years to pay down enough principal to make up the closing costs, for example, that has to be taken into account, but in the buy-only mentality, I don’t think it is.

        1. I don’t think I’ve ever seen a house which didn’t need some sort or repair at any given time. They’re like the Golden Gate Bridge – once you’ve finished painting, it’s time to start all over and do it again.

        2. If it takes one ten years to pay down enough principal to make up the closing costs

          Here’s where the stupid comes in, and it doesn’t require a spreadsheet. Most of us, if we are very fortunate, have 40 years of productive career. If it takes 10 to cover the closing costs, you can never pay that mortgage off.

          How many millions who have been sitting home unemployed are reconsidering how they want to spend their lives.

    2. The Barclays CEO said he is never going to have thousands of employees in a building going forward – so other than key executives and their staff, folks are going to be in smaller facilities or working from home.

      Once you start that you dont need to pay London wages – set up smaller facilities 2-4 hours outside of London core. Canary Warf and all those expensive condos are going to be in trouble.

  6. “Sydney investor Mike Scotland, a former school teacher, owes $1.1 million to the banks and is in a similar predicament. Mr Scotland has six investment properties and all the loans have switched to principal and interest.”

    A former school teacher buys six homes as investment properties. Nah, he wasn’t over-leveraged.

    And just how fast would values/prices need to rise, to make things work out? Six (maybe he has a seventh on his primary residence?) mortgages all resetting from interest only to interest+principal.

    As for the couple with two properties on the Gold Coast (east coast of Oz) and then one in Western Australia (WA)… I wonder where exactly the WA property is? On the west coast of Oz? That would obligate them to at least occasionally travel across the country (Oz is about the size of the 48 states) to check on it, do some work, etc.

    Degenerate gambling writ large!

    1. To be fair, the couple lives in Radelaide. So Gold coast 2 hour flight. Perth 3 hour flight. Oh wait both involve getting on a plane. Jetstar, yes!

    2. so he gave up a real job to become a real estate investor. Fine to do – but you need to be a professional about it and have positive cash flow and a reserve.

      Otherwise you are a gambler and looking for someone to bail you out

      1. You have to have extremely deep pockets to be a long-term real estate investor. These people who jump in during the good times to capture appreciation while overpaying are nothing but fly-by-night speculators.

    3. “And just how fast would values/prices need to rise, to make things work out? Six (maybe he has a seventh on his primary residence?) mortgages all resetting from interest only to interest+principal.”

      So assuming it takes 5-7 years to recover and even out all his costs. That is 5-7 years where he has no cash flow and no ROI. If there is inflation there is no gains – he has to hope for deflation

  7. Sheets said the lack of tourists is just one more challenge faced by short-term rental owners, who are already hit with the speculation tax, commercial taxes similar to hotels and a $1,500 City of Victoria business licence fee.

    The world will be a better place when the last housing speculator throws in the towel, crushed by their financial losses.

  8. Sun Hung Kai Properties, the city’s most valuable developer, managed to sell 162 of 200 flats, or 80 per cent of units offered in the first batch of the second phase of its Wetland Seasons Park project in Tin Shui Wai after cutting prices by up to 18 per cent.”

    The stamping of little feet from pre-discount buyers is reaching a crescendo. Under the bus you go, bagholders.

  9. “But instead of earning an income from them, the couple in their 60s are paying $9,000 a month to the bank to cover their loans, which switched from interest-only to principal and interest last year. Mr McShane said the couple were running out of funds and would ultimately be forced to sell in the falling housing market.”

    Die, speculator scum. You and your greed, plus unlimited hot-money Yellen Bux sloshing around the globe for the past 11 years, made shelter unaffordable for the masses. Now I hope you greedy Boomers end up living in a cardboard box while the prudent and responsible finally get a shot at affordable home ownership.

  10. And that’s the reason why we invested in property — we didn’t want to be a burden.’”

    No, it’s because you saw an opportunity to fund your retirement by gouging younger generations. Enjoy your cat food years, greedheads.

    1. Some people just put 20% of their income into a superannuation, and live modestly.

      Others leverage themselves on mortgaged properties, and live it up during the fat times, laughing at those who save.

    2. People laugh at my conservative investing. I just sold my mREIT ETF for a 4% gain and I am very satisfied. I sold my single mREIT for a 10% gain.

      I am currently invested in foreign stocks now to take advantage of dollar depreciation and asset price appreciation. I can get a 5% return on my investment just through currency movement. Long-term disciplined investing is the way to go.

      1. sold my mREIT ETF for a 4% gain

        Of course you did, but you’re not a real legend unless you were highly leveraged.

        1. You don’t hear about the losses because I don’t sell until I realize a gain. It’s discipline that I’ve developed over 8 years of investing. I’ve never panic sold and that is why I don’t have any realized losses. I don’t use any leverage. I do simple dollar-cost averaging into positions. I also don’t own any unorthodox ETFs.

  11. ‘The rationale was that there is no way to gain wealth in Australia unless you invent a better mousetrap, win the lottery, have a brilliant business or maybe you do a bit of investment,’ he said.

    Hey, weren’t you the clever guy bragging at cocktail parties about the cash flow those shacks were generating in appreciation? You bought into the fraud of riches through speculation on asset bubble inflation promoted by the Keynesian fraudsters at the central banks. Now the financial reckoning day has finally arrived, and true price discovery is going to be a bit*ch.

    1. Yup. No more Land Rovers, frequent out of country trips, country club membership, etc.

      And if I’m not mistaken,all mortgages in Oz are recourse. That alone should scare anyone way from “investing in real estate”.

      1. That alone should scare anyone

        Makes it a game for those who have nothing to lose to begin with.

        1. Having your wages garnished for the rest of your life sounds like “something to lose” to me. Like those people who are in arrears with student loans when they retire only to find the SS benefits garnished.

          1. Having your wages garnished

            That doesn’t happen after a bankruptcy. I have no idea about student debt in bankruptcy in Australia.

          2. My understanding is that student loan debt in the US is not discharged in bankruptcy.

          3. in the US

            I think so too. We are in an Australia thread though. They might not be quite as “reformed” as we have become.

          4. “…only to find the SS benefits garnished.”

            The government deducts 50% of your monthly cash benefit. There have been several stories of parents who co-signed for their children who didn’t complete their education. Then these debt donkeys are braying, “woe is me!”

  12. ‘People think property investors are multi-millionaires but probably about 40 per cent of them never make a profit. They’re not rich, fat cats, they’re just people trying to get ahead for the most part.’”

    You’re greedy speculators. FOAD.

  13. “He envisaged he would have to sell in eight or nine months’ time, at a loss. ‘So I’m heading towards a deadline, I’m heading towards a cliff,’ he said.”

    I’ll be in my lawn chair, waving buy-bye, as you and the other asset bubble speculators plunge into the financial abyss.

  14. Airbnb bookings has ‘just died’ with the lockdown, Liddell said.”</em.

    Sarah's dreams of effortless wealth from speculating on asset bubbles just died in the arse.

    1. Sarah’s dreams of effortless wealth from speculating on asset bubbles just died in the arse.

      Mini,um wage in Oz is about $13 USD/hr. She won’t be buying a Land Rover or a BMW with that.

  15. As the globalist oligarchs and their Democrat minions push their agenda of nullifying the 2nd Amendment in preparation for taking their “redistribution of the wealth” to levels worthy of their ideological guiding light, Karl Marx, a Russian gives us a timely warning.

    https://www.ammoland.com/2012/12/americans-never-give-up-your-guns-a-warning-from-a-russian/#axzz6BPK8eYc2

    For those of us fighting for our traditional rights, the USA’s “2nd Amendment” is a rare light in an ever darkening room. Governments will use the excuse of trying to protect the people from maniacs and crime, but are in reality, it is the bureaucrats protecting their power and position. In all cases where guns are banned, gun crime continues and often increases. As for maniacs, be it nuts with cars (NYC, Chapel Hill NC), swords (Japan), knives (China) or home made bombs (everywhere), insane people strike. They throw acid (Pakistan, UK), they throw fire bombs (France), they attack. What is worse, is, that the best way to stop a maniac is not psychology or jail or “talking to them”, it is a bullet in the head, that is why they are a maniac, because they are incapable of living in reality or stopping themselves.

    1. Its nurse Ratched. Both a ratchet, a tool of force, and wretched because she acts in controversion of her purpose. The portmanteau goes to Kesey’s thesis: the institutions too many of us trust are both evil and pitiful in their perversity and we will pay for continuing to whistle past the graveyard, because someday, the reaper, or the nurse, or the contact tracer, or FISA or SWAT will come calling. Kesey was a motherfragging genius.

  16. What portends well for oil price and profits consolidation is a death knell for production, employment, gross revenues, and positive regional economic impacts.

    1. Coronavirus business update 30 days complimentary
      Shale Oil & Gas
      US oil production drop steeper than expected
      Data suggest largest reductions are in Texas’s Permian shale field and North Dakota’s Bakken as low crude prices bite
      Genscape, a unit of consultancy Wood Mackenzie, says production has dropped almost 20% from a peak in March
      © REUTERS
      Derek Brower, US energy editor May 22 2020

      US oil production is falling more steeply than expected, forcing analysts to scale back output projections even before a deep plunge in planned upstream spending further cuts supply later this year.

      Genscape, a unit of consultancy Wood Mackenzie, said production by May 20 had dropped almost 20 per cent, or 2.3m barrels a day, from a peak of 13.24m in March.

      The volume lost already is almost as much as Russia and Saudi Arabia last month pledged to cut in a historic supply deal that begins in June. It will alarm US politicians, including President Donald Trump, who pressured Opec to shoulder production cuts in a bid to push up oil prices so that American producers could profitably keep pumping oil.

      Genscape’s latest numbers, based on satellite monitoring and heat sensors at facilities across the US, suggested the biggest reductions were in Texas’s Permian shale — down 1.15m barrels a day — and North Dakota’s Bakken — 480,000 b/d.

      Paul Horsnell, head of commodities research at Standard Chartered, said producers had already cut about 1.5m b/d more than official estimates. He predicted output could drop below 10m b/d in the coming weeks, down more than 3m b/d since March.

      US shale output responds faster to price changes than other sources of oil, but analysts have disagreed over how much supply it will shed during the worst oil-price crash in decades.

      Goldman Sachs had estimated the losses would reach a maximum of 1.3m b/d in the second quarter before “mostly reversing” as the oil market began to recover in the second half of 2020.

  17. Should human citizens of Planet Earth be concerned about the ginormous piles of debt currently being accumulated to fight the COVID-19 crisis, or is it safe to assume that it will all be contained going forward by the Planet’s central banking establishment?

    1. Bear porn warning: The article posted below is specifically designed to be viewed by adults and therefore may be unsuitable for children or adults with childish minds. The article may contain one or more of the following: openly pessimistic language (L), predicted societal collapse (S), or anticipated violence (V).

      The Economy
      May 22, 2020
      Why Our Economy May Be Headed for a Decade of Depression
      By Eric Levitz
      The worst is yet to come?
      Photo: Spencer Platt/Getty Images

      In September 2006, Nouriel Roubini told the International Monetary Fund what it didn’t want to hear. Standing before an audience of economists at the organization’s headquarters, the New York University professor warned that the U.S. housing market would soon collapse — and, quite possibly, bring the global financial system down with it. Real-estate values had been propped up by unsustainably shady lending practices, Roubini explained. Once those prices came back to earth, millions of underwater homeowners would default on their mortgages, trillions of dollars worth of mortgage-backed securities would unravel, and hedge funds, investment banks, and lenders like Fannie Mae and Freddie Mac could sink into insolvency.

      At the time, the global economy had just recorded its fastest half-decade of growth in 30 years. And Nouriel Roubini was just some obscure academic. Thus, in the IMF’s cozy confines, his remarks roused less alarm over America’s housing bubble than concern for the professor’s psychological well-being.

      Of course, the ensuing two years turned Roubini’s prophecy into history, and the little-known scholar of emerging markets into a Wall Street celebrity.

      A decade later, “Dr. Doom” is a bear once again. While many investors bet on a “V-shaped recovery,” Roubini is staking his reputation on an L-shaped depression. The economist (and host of a biweekly economic news broadcast) does expect things to get better before they get worse: He foresees a slow, lackluster (i.e., “U-shaped”) economic rebound in the pandemic’s immediate aftermath. But he insists that this recovery will quickly collapse beneath the weight of the global economy’s accumulated debts. Specifically, Roubini argues that the massive private debts accrued during both the 2008 crash and COVID-19 crisis will durably depress consumption and weaken the short-lived recovery. Meanwhile, the aging of populations across the West will further undermine growth while increasing the fiscal burdens of states already saddled with hazardous debt loads. Although deficit spending is necessary in the present crisis, and will appear benign at the onset of recovery, it is laying the kindling for an inflationary conflagration by mid-decade. As the deepening geopolitical rift between the United States and China triggers a wave of deglobalization, negative supply shocks akin those of the 1970s are going to raise the cost of real resources, even as hyperexploited workers suffer perpetual wage and benefit declines. Prices will rise, but growth will peter out, since ordinary people will be forced to pare back their consumption more and more. Stagflation will beget depression. And through it all, humanity will be beset by unnatural disasters, from extreme weather events wrought by man-made climate change to pandemics induced by our disruption of natural ecosystems.

      Roubini allows that, after a decade of misery, we may get around to developing a “more inclusive, cooperative, and stable international order.” But, he hastens to add, “any happy ending assumes that we find a way to survive” the hard times to come.

      Intelligencer recently spoke with Roubini about our impending doom.

      1. our impending doom

        Massive debt destruction is not an inflationary conflagration.

        It will be off season for debt donkeys for quite a while.

      2. I read that. I think the part about Capital wins and labor loses was pretty interesting. Work comes back to the US but most labor replaced by Robots.

        1. “I think the part about Capital wins and labor loses was pretty interesting.”

          “There are millions of new online accounts — unemployed people sitting at home doing day-trading — and they’re essentially playing the market based on pure sentiment.”

          Capital loses too.

    2. What does the central bank do? It buys debt, sucking it out of the system, replacing it with printed cash, given to the previous owners of that debt. These are typically Treasury debt, to fund the government, and mortgages, to fund the GSEs. Sometimes other asset backed securities. Now it’s buying ETFs, and soon perhaps may buy stock.

      The goal is to inject money into the economy and to spark inflation expectations (i.e. spend now because your money will be worth less later). They want more money circulating in the economy. People engage in economic activity for the slips of currency.

      I heard Powell on the radio one day saying that during the Fed “listening sessions” last year, they heard a tremendous amount of optimism and positive feedback from the lower tiers of employment, and the Fed had finally seen some movement up in wages from those bottom tier income groups, prior to Covid. So this is the justification to continue their policies. Of course, the Fed was created in 1913 to protect the government and the financial sector, so that is its primary goal.

      So, yes and no regarding the ginormous debt piles IMO. By sucking debt out of the financial system, and onto their magic balance sheet, replacing it with cash for the sellers of that debt, the Fed achieves two things: 1) injecting more currency into the system encouraging economic activity, and 2) protecting the financial system. The Fed hopes that money will find its way into the real economy. The problem lies in those that have to pay off the debt, who reduce spending due to the debt. The Fed wants to increase the money in the economy without sparking hyperinflation, which violates its core mandate of protecting the government (politicians don’t get re-elected during periods of high inflation – the lowest incumbency rates were during the late 70s and populism and social unrest increases) and the financial sector’s purchasing power goes down.

      Look then at the PPP loans – those loans can be cancelled. Perhaps selective debt cancellation will be part of the Fed toolkit. It de facto happened in certain cases with mortgages, during the foreclosure moratoriums.

      The problem with loan cancellation is that debt servicers get paid for servicing the loans. I’m guessing the Fed will have to build up a facility to service loans (also realize a nontrivial amount of the Fed’s actions are to prevent the destruction of financial infrastructure – people making loans, bank branches, the capillary administrative trivia that allows the system to function, because they don’t have that and 2) Wall Street doesn’t want them to have that).

      The Fed could bypass all these issues with “The Narrow Bank” but Wall Street doesn’t want them to have this, and the Fed would have to build up the infrastructure to administer it.

      Does the debt matter? It does, but it’s just increasing the number of zeroes in database entries. What the Fed does is implement trickle-down economics. Is increasing debt and trickle-down sustainable? I imagine it makes the system top-heavy and fragile so one may get more unexpected politicians elected, and it reduces spending due to debt servicing. If associated with selected debt cancellation, perhaps it can be manageable.

      Of course, what would be the side effects of debt cancellation? House, car and credit card debt could be cancelled, perhaps in some kind of lottery system. Probably just encourage more debt and bid up prices further. The result of selective debt cancellation would need to be carefully considered.

  18. “And through it all, humanity will be beset by unnatural disasters, from extreme weather events wrought by man-made climate change to pandemics induced by our disruption of natural ecosystems.”

    Global warmism is gonna finish what Chinese coronavirus started. Every subsequent “recovery” will only be another dead cat bounce along the irreversible slinky ride to the bottom of the stairs i.e. the extinction of humanity.

    Enjoy the decline 🙂

        1. If astronomers are right, the Earth will be destroyed when the sun turns into a red giant.

          1. At some point, yes, the earth is finished, too. But, human beings will long be gone like the dinosaurs before that happens.

  19. I don’t have any respect for the CDC and WHO anymore

    When these agencies get in bed with a big industry like Health care/Big Pharma than
    It’s curtains to free choice.

    Most people are noticing that shutting down the whole Nation over a high risk group in nursing homes and over 80, who every year have a high death rate from respiratory death, was a over reaction.
    Ok, so they were operating on the worst models and they needed to shore up the Medical system and flatten the curve. I think after about 4 weeks of this people didn’t see the logic in it to continue.

    When the Medical Cartel has 225 thousand deaths a year average from big Pharma mishaps one wonders why no concern about that was alarming.

    Now one more entity that has power over your life and they are angling at forced vaccines.

    The Medical Cartel was losing its grip on the gaining lack of popularty of vaccines.
    While a concept of building health the good old fashion way was building people were starting to question all the magic pills being peddled by Big Pharma and the side effects.

    With the ongoing high costs of health care people were backing off because they couldn’t afford the price fixing monopoly called health care.

    The Health Care industry wants to take 20 to 25%of your yearly income or have the Government supplement those who can’t afford that.

    How is it that when I was young medical only took 5to 7% and the employer often times paid that as a employee benefit because it was cheap. People were not dying by droves in the streets because of a lack of a magic Pharma pill. People didn’t revolve their life around medical.

    Better nutrition, clean water, and the modern day plumbing system probably did more to irracate disease ,as well as the simple antibiotic, than all these magic pills from big Pharma.
    Sure medical has life saving measures , but who ever said you needed to take 10 pills long term to survive.
    This is really alarming that the medical system had this much power to shut down all commerce and take your means of support and make you poverty stricken and maybe homeless .

    I’m surprised people didn’t object to this lock down sooner, but fear takes a little time to overcome.

    Welcome to the world of one more powerful Cartel ,being Medical ,wanting to control your life and take your money.

    1. How is it that when I was young medical only took 5to 7%

      FWIW, there are a lot of procedures that didn’t exist back then, like joint replacement.

      Also, there are a lot more old people than before (percentage wise). Many of them have medical issues.

      There is also a lot of risk aversion, which makes everything more expensive.

      And on top of all that, we are being gouged.

      1. Knee and hip replacement doesn’t really justify the high cost of Big Pharma.

        I predict that 100 years from now they will look at the Big Pharma phase of medicine as a phase that did more harm than good and it was profit motive and corruption was behind it.

        I’m telling you that this Big Medical is contrived. it’s not really sustainable medical. Lifestyle has always been the biggest factor in health , not having a deficiency of magic pills from Pharma.

        Than when you got Google banning contrary information than the CDC narrative than goodbye free speech and right to contrary data.

          1. I would be the first to say that the antibiotic was a great medical science discovery.

            I’m not saying that medical system doesn’t have some good stuff or they don’t have some good Pharma.

            The medical system has the dope to relieve pain when your injured, I think everybody appreciates pain relief.

        1. Knee and hip replacement doesn’t really justify the high cost of Big Pharma.

          FWIW, you don’t have to obey the TV ads and ask your physician about pricey drug X. There are plenty of generics that work just fine.

          1. It really doesn’t matter what you ask for or what you don’t partake in, the Medical system wants to get X amount of dollars per head per year. And if anybody doesn’t think that rationing isn’t going on they don’t know medical insurance companies.

        2. Lifestyle has always been the biggest factor in health , not having a deficiency of magic pills from Pharma.

          FWIW, my paternal grandmother, who was a lean and hardworking farmer’s wife, suddenly keeled over and died of a stroke (she was found in the yard) before I was born just after she turned fifty. I later learned that she never saw a doctor and that perhaps some blood pressure pills might have extended her life.

          I have shared this information with my doctor, who has been very proactive about managing my blood pressure with low cost medication. And no, I don’t “ask him about X”

          1. High blood pressure runs in my family. I changed my diet and mine’s fine. My extended family eats junk and takes pills.

          2. My extended family eats junk and takes pills.

            I can assure you that my grandmother wasn’t overweight nor washed down twinkies with coca cola.

            But yeah, the fatpocalypse is going to make things a lot worse. If you want to see how bad it’s getting, go onto youtube and watch a “disneyland workaround” some dude recorded with his gopro. Obese people everywhere, especially women, but plenty of dudes too. Blood pressure pills will not save them.

          3. They’re not fat, they’re just eating the wrong foods. High sodium, high sugar, processed, etc.

  20. I’m not trying to say that blood pressure meds aren’t necessary some times. I would be changing my diet and doing anything I could to get off the meds. If it isn’t possible for a person than it isn’t possible.

    1. I’m impressed with the advancement in eye care from medical.
      I’m not saying all of the medical system is bad for God Sakes .

    2. My (former?) profession aides and abets the pharma industry. The last few months have really opened my eyes to the extent of cronyism in it.

Comments are closed.

Back To Top