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Developers Are Hurting Right Now, And Are Willing To Get Creative

A report from Market Watch. “For the past several months, wealthy buyers in search of safety and personal space have flocked to vacation and single-family home markets across the country, leaving some new condo developments out in the cold. But rather than offering overt discounts, many developers are bridging the gap with unusually dramatic concessions. ‘If the sellers don’t concede, there’s just no deal, for the most part,’ added New York-based Compass agent Rachel Glazer.”

“While this phenomenon appears to be more pronounced in New York City, which faced an excess of new development inventory and sluggish sales even prior to the pandemic, high rises in other cities aren’t exempt. ‘The condo market has really slowed up. People don’t want to live in multifamily dwellings,’ said Jill Epstein, an agent with Nourmand & Associates in Beverly Hills, California. ‘We just closed on a higher-end condo last week and the concession that was offered was some customization [to the apartment] and a bit more flexibility in price. In general I haven’t seen prices go down yet, but when the market adjusts, condos are the first to get hurt and the last to recover.'”

“‘In new developments, we were already seeing around a 7% typical discount [prior to the pandemic], and now it’s probably more like 15% with everything thrown in,’ said Seth Levin, a broker with Keller Williams New York City. He added, ‘There’s nuance, but it’s straightforward—developers are hurting right now. But they want to protect their prices, and are willing to get creative.'”

From The E’ville Eye in California. “The contentious Onni Tower project that would be the East Bay’s tallest high-rise is apparently no more. Planning & Building Director Charlie Bryant made the announcement at Thursday’s Planning Commission meeting noting that the project had ‘fallen out of contract’ and the application was ‘deemed withdrawn.'”

The Orange County Register in California. “Alicia Kneifl had just started a new life in a new city with a new job. She and her husband sold their house in Lancaster, put their goods and their boat in storage, and rented an 11th-story Long Beach apartment with city and ocean views. Then the coronavirus shutdowns came, and the Kneifls rapidly lost everything — first their jobs, then their savings.”

“They paid less than half their rent through June and couldn’t pay any in July. Adding to their hardship, Kneifl’s unemployment check will drop to $198 next week unless Congress extends the $600 weekly unemployment supplement approved under the CARES Act. ‘You can’t really survive on that. That’s nothing,’ Kneifl said during a phone interview, starting to sob. ‘All day long, I’m researching. Mornings, I’m applying for jobs, afternoons I’m trying to find resources, like food stamps. … It’s definitely a scary situation.'”

“A U.S. Census Bureau survey found that 22% of Southern California tenants said they failed to pay their June rent on time. Thirty-seven percent said they have little to no confidence they’ll be able to make their next payment on time. ‘Missed rent payments could become more common if Congress doesn’t take steps to provide financial assistance for those who have lost jobs,’ said Greg Willett, chief economist for RealPage.”

“Southern California landlords also are getting hit as vacancies rise and rent hikes shrink. ‘Without a doubt, we’re seeing an increase in vacancies, and rents are decreasing,’ said Fred Sutton, the California Apartment Association’s L.A. spokesman.”

“Susan Taylor of Newport Beach, laid off from her job as a real estate appraiser, hasn’t seen a dime of unemployment benefits, nor has she gotten the $1,200 stimulus payment from the CARES Act. ‘I’m hoping that (assistance) will come through,’ she said. ‘Now would be a good time.’ Taylor has only paid 40% of her rent since March. She’s negotiated with her utilities to work out a payment plan. Her only expenses are food and medicine. ‘Beyond cost-cutting on food, utilities and all non-essentials, I’ve put off getting glasses, dental work, non-urgent medical appointments (and) haircuts to keep a roof over my head,’ she said.”

From Salem News in Massachusetts. “You could practically hear the collective exhale last week when Gov. Charlie Baker said the state would stretch out an emergency ban on foreclosures and evictions. People can stay in their homes at least another 60 days past the ban’s original expiration, was the gist, even if they’re out of work and struggling to pay the bills. The rush of relief, however, goes just so far. Putting off foreclosure does not pay the mortgage. Delaying eviction does not catch up a tenant’s overdue rent. Homeowners and renters are still on the hook.”

“In the first couple months of the COVID-19 shutdown, nearly one-third of the state’s renters told MassINC pollsters they’d fallen behind on their rent, CommonWealth magazine reported. Only 1 in 5 of those said it was ‘very likely’ they could catch up on their payments by the end of the moratorium. Doubtless those numbers swelled over the summer.”

“Protection comes with a cost, and the landlords are paying. So much that they’re suing the state in federal court to block the eviction ban. They argue it violates their Fifth Amendments right by taking their property without compensation and blocks their due process rights to seek relief in court.”

The Youngstown Vindicator in Ohio. “For home buyers, a new illness is taking over that, though it is preventable, seems to infect everyone who purchases a home at some point in their lives. Don’t worry, this virus does not impact your physical health, but directly impacts your mindset as a home buyer. Of course, I’m talking about buyer’s remorse.”

“The ink isn’t dry on the closing papers and thoughts begin to creep into your mind: Did I make the right decision? Should we have done this? Can we afford this? Did I get the best price? Is there a better home out there for us? All of these questions are symptoms of buyer’s remorse.”

“While many pop a bottle of bubbly or nice wine to celebrate the new property, some aren’t as enthusiastic about your purchase. We all know people who can take the fun and excitement out of the happiest moments in our lives. Should you encounter people who have strong opinions about your new purchase, don’t listen to them. Whether it is the crown molding, the final sale price of the home, the location or the color of the walls, keep those voices out of your head. Surround yourself with people who reinforce your decision to purchase your new home and make you feel as special as your new home is to you.”

“Buyer’s remorse is a common diagnosis for new home buyers. The process of buying a home is long and arduous. After buying your dream home, you can easily become susceptible to second thoughts about your decision. Pay attention to your symptoms and realize that this is all normal. Most importantly, it is curable by simply looking at the hard work you put into this decision and admiring what you have been able to accomplish in testing positive for a different type of label you now carry: a homeowner. Patrick Burgan is the 2020 president of the Youngstown Columbiana Association of Realtors.”

This Post Has 109 Comments
  1. ‘rather than offering overt discounts, many developers are bridging the gap with unusually dramatic concessions’

    Of course, the article fails to mention they are minting millions of FBs.

  2. ‘Susan Taylor of Newport Beach, laid off from her job as a real estate appraiser’

    Wa? But UHS says red hot, multiple offers, Thornberg!

  3. In NJ, the part of the NY City commute area, there are buckets full of apartments/condos going up around train stations [Cranford] but the former packed parking lots at the stations are at 10% capacity now, so the allure of “walk” to train has lost its shine.

    1. I was thinking yesterday we could be witnessing the end of NYC as we knew it. Other cities too.

      1. NYC has been down on its luck multiple times. Somehow it always seems to find away to bounce back.

        1. Yeah, I’ve read that a couple hundred times the past few months. Fact is, this is magnitudes worse than September 11, 2001. And it’s not over. The reason for being is gone, at the recent prices. The CRE is doomed. They may be looking at the worst default waves in modern history.

          These past few months we’ve all faced fear. I’m sure every one of you has contemplated that “this may be the big one Elisabeth!” personally. There’s also irrational fear. For myself, I hope NYC survives and does well. Same with the other cities. It’s going to take some stones though, not bed-wetting hysterics.

          1. I have to agree with Ben. 9/11 didn’t kill NYC, but Zoom will. People are willing to pay for “vibrancy” if they need to be there anyway to go to the office. But will they pay for “vibrancy” alone?

          2. A lot of the amenities that attract people to NYC and other large metros (live music, live theater, bar scene, restaurants, physical access to good jobs in high rise office buildings, sports events, etc.) are dead in the water until the end of COVID-19.

            And a number of reasons why people don’t like to live in cities (risk of getting caught in a riot, looting, violent crime, etc.) are alive and well.

            Good luck to NYC and other major U.S. cities at weathering this storm.

          3. “9/11 didn’t kill NYC, but Zoom will.”

            And not just NYC. The FAA(M)NGs have “ALOT” of buildings and the only people that really need to be there are those accessing lab equipment and such. Oh, dear.

          4. The FAA(M)NGs have “ALOT” of buildings and the only people that really need to be there are those accessing lab equipment and such. Oh, dear.

            Yeah, the Seattle City Council seems to be quite idiotic in their recent actions, given the likelihood of employees returning to the office even without them trying to “stick it to the man”

        2. Get prices falling fast and deep enough and everywhere will bounce back.

          Brooklyn, NY Housing Prices Crater 15% YOY As Rental Rates Plummet

          https://www.zillow.com/new-york-ny-11236/home-values/

          *Select price from dropdown menu on first chart

          As a leading economist advised, “Sell that house for whatever it will fetch because it’s going fetch a lot less later.”

      2. A lot of cities were already open air zoos filled with those without neanderthal DNA. This doesnt get fixed until we elect someone willing and able to identify and eliminate the problem.

    2. “so the allure of “walk” to train has lost its shine.”

      Man that just snapped me back to Old Greenwich Ct. where I grew up in the 70s. Those dudes walking to the train station with their brief cases in the morning, the housewives in their housecoats and curlers dropping their husbands off if they were running late or if it was raining. And when I was old enough to work at my old mans gas station how that little town would explode when that 6pm train brought them back.

      1. ” … dudes walking to the train station with their brief cases in the morning …”

        My dad did that in the early 70s on the long Island RR.

        1. It amazes me that with the civil unrest, the economic uncertainty, the COVID threat and the insane prices that anyone would want to buy a shack, especially within the city limits of a mal-administrated city that lacks the will to keep the streets safe and has a growing homeless population.

        2. Ultra cheap rates are juicing what’s left of the market. The problem (one of them anyway) is that it’s pulling forward future buying.

          When rates rebound and inflation sandworms into everyone’s personal economy, people are going to hang on to those 2-3 percent mortgages like the great houses in Dune held on their “family atomics” and the future market will be that much bleaker

          /sci-fi reference

          1. Yep, I’ve been watching properties for sale in mid- New Hampshire for most of this year and it appears that a bunch of almost finished home/2nd home properties are coming to market. Must be that these people are realizing that the rental market for vacation stays is dead through the winter and maybe into next summer.
            My guess is that real bargains won’t happen until it gets into the midst of the ski season which is going to be down 50% from “normal” at least.

  4. “…Patrick Burgan is the 2020 president of the Youngstown Columbiana Association of Realtors…”

    “…Buyer’s remorse is a common diagnosis for new home buyers…”

    “…Pay attention to your symptoms and realize that this is all normal…”

    Just gotta love the REIConplex jargon.

    Patrick Burgan riddle me this:

    Is getting into debt far beyond your means to pay a “dream home” or just shooting yourself in the foot financially?

    I’m sure you will respond with an objective answer.

    1. “Is getting into debt far beyond your means to pay a “dream home” or just shooting yourself in the foot financially?’

      One person’s financial bullet in the foot is another person’s easy money.

      Position yourself correctly in this world of dummies and you will find yourself set up for a life of leisure.

      Pukes work, bankers reap. God’s Plan.

  5. San Diego, CA Housing Prices Crater 12% YOY As Housing Demand Plummets And Inventory Backs Up

    https://www.zillow.com/san-diego-ca-92128/home-values/

    *Select price from dropdown menu on first chart

    As one California broker conceded, “If you’re a buyer, the broker is lying to you. I know a liar when I hear one. I’ve been lying my entire life.”

  6. “‘In new developments, we were already seeing around a 7% typical discount [prior to the pandemic], and now it’s probably more like 15% with everything thrown in,’ said Seth Levin, a broker with Keller Williams New York City. He added, ‘There’s nuance, but it’s straightforward—developers are hurting right now. But they want to protect their prices, and are willing to get creative.’”

    I’m not sure who these idiots are, but I don’t accept “concessions.” The ONLY thing that will move me in is a lower PRICE. PERIOD.

    1. Here’s the thing: these are price cuts. But if they openly cut prices, they could get their financing pulled. So it’s basically fraud, with the lenders winking at it.

      CRE bond holders, you are getting sold down the river.

      1. “CRE bond holders, you are getting sold down the river.”

        Shhhhhh … don’t rock the boat.

  7. At this point I think they are going to bury Ruth Bader Ginsburg before they bury civil rights icon John Lewis.

  8. People don’t want to live in multifamily dwellings,’ said Jill Epstein, an agent with Nourmand & Associates in Beverly Hills, California. ‘

    You got that right. Too many rude, ignorant lowlifes with no consideration for their neighbors, blasting music or their TV at all hours. No thanks.

    1. That was the old reason. Now with corona nobody needs any other reason to avoid being too close to other people.

      1. NYC made a come back after 911.
        But, this time you have so called Americans attacking the Cities. Americans wanting to get rid of the police and holding up one arm, a Communist gesture, along with vowing to cancel anything American.

        Jesus, how do you brainwash people to attack the Civilization that sustains them in favor of a dumb fantasy of Commie regime with get rid of those bad WHITES.
        It’s so fu-king stupid that one would never think it could gain traction, but it did.
        They are cult like zombie drones, and vicious and dangerous to. How do you deprogram this insanity? They view themselves like a justified ARMY.

        1. Jesus, how do you brainwash people to attack the Civilization that sustains them

          All you have to do is let them naturally think that the civilization the provides for their every need will do so automatically no matter what kind of economic system it operates under. Anyone who believes that is true will naturally turn their full attention to fairness issues since everything more critical to their survival is and always will be provided automatically if not “stolen” by the “fascists”.

          1. Well Carl, than if they are that stupid than they don’t know what they risk. Some kind of blind spot .

          2. They will keep enough productive people around to keep the lights on and the shelves stocked, like in South Africa. Though the current farm confiscation program could lead to bare shelves there.

          3. They will keep enough productive people around to keep the lights on and the shelves stocked

            Some of *them* are productive people. But we’ve seen how they turn on each other…

        2. (Playing devil’s advocate)

          What are they supposed to do though? This is a country top to bottom fueled in corruption enabled by the federal reserve. They know they have no chance of ever owning a home, ever finding a decent job with their worthless degrees, ever paying off their student loans….so on and so on. I think the anti-white play is misguided and overplayed, but what else is left to do for them….

          1. “And they will learn, the hard way, that things can be far, far worse.”

            Yep. Agree on that.

          2. “corruption enabled by the federal reserve.”

            +eleventy billion

            We’re losing sight of the real culprit, IMO.

            (Disclaimer: I may be biased as I’m again making my way through The Creature from Jekyll Island…)

          3. “…but what else is left to do for them…”

            First they need to get out of the vicious Cult of Marxism that has warped their brains.

            Than they have to start voting for policies that will correct the wacko policies that betrayed them by the political left and their Globalist partners.

            And maybe. they should get off the meds. Boycott the price of real estate , or anything that’s a gouge by the Looters. Don’t go into debt unless it’s affordable.
            Lot more they could do, but what they are doing is vicious and destructive.

          4. Than they have to start voting for policies that will correct the wacko policies

            Who is advancing these corrective policies? Nobody from either the Dems or the GOP.

          1. “Who is advancing these corrective policies.”

            The outsider Trump was advancing some corrective measures, but the Resistance was so embedded in institutions that Commie takeover was built in the Swamp.
            So, what has come out is just how much different the vision is for half the Country verses the other half.
            So, the Dems army is out there showing their true colors with their brainwashed cult of Commies.
            So, sometimes all you can do is stop a insurrection before you can even have the luxury of corrective measures.
            Trump is standing in the way, so a Trump election is the only choice unless you want this vision by the Dems which is better described as a Big Government takeover of America, which is Commie.

          2. To quote Mark Steyn, we have to drag the Republicans across the finish line,or we will have a reign of terror if the Dems win.

          3. And like Steyn, I am not thrilled with the GOP at all, but the alternative is chilling if not flat out terrifying.

  9. ‘There’s nuance, but it’s straightforward—developers are hurting right now. But they want to protect their prices, and are willing to get creative.’”

    How’s this for creative: rather than deal with greedhead sellers, I wait for the property to go into foreclosure, then deal with whoever bought it for a song and prices it to be a compelling value in our oligarch-pillaged, COVID-ravaged economy.

  10. That’s nothing,’ Kneifl said during a phone interview, starting to sob. ‘All day long, I’m researching. Mornings, I’m applying for jobs, afternoons I’m trying to find resources, like food stamps. … It’s definitely a scary situation.’”

    The Kneifls of the world might start to take a more active interest in who hijacked their country and looted its economy as they sink deeper into destitution.

    1. I want to know what her “new job” was if her unemployment was less than $200/wk. Enough to make a dent in the rent of an apt in Long Beach with ocean views?

      But I have to be fair; I have to admit that I was lucky to have a house, car, cubicle job, and savings when this hit. If this virus had hit 20 years ago, when I was in my 20’s, I would be in their position too.

      1. But I have to be fair; I have to admit that I was lucky to have a house, car, cubicle job, and savings when this hit.

        Me too. I’ve gotten the short end of the stick a few times but I got lucky this time.

        1. Same here. I was laid off right after 9/11. That job hunt was stressful, one of the low points in my life.

          1. Same here. I was laid off right after 9/11. That job hunt was stressful, one of the low points in my life.

            I got through that recession unscathed. That was around the time IBM was trying to sell us. I heard later we were only weeks away from closing the doors but luckily a deal with struck with LSI and I got another 10 years of work out of it.

            For me the low point was job hunting right out of college. Just another rural military veteran with a fresh engineering degree and no contacts and no internships (I did military duty each summer) trying to making it in the “big city” of the Front Range in 1995. Things were already looking up for experienced guys by then but for guys like me it was 1996 before it got easier. Got two job offers at the same time in December of 1995 after nine months of interviews but no offers…

      2. Yep, sitting relatively pretty here on my small-but-sure federal gov’t pension, with good healthcare. Whew!

  11. “Protection comes with a cost, and the landlords are paying. So much that they’re suing the state in federal court to block the eviction ban. They argue it violates their Fifth Amendments right by taking their property without compensation and blocks their due process rights to seek relief in court.”

    For a lot of landlords who mindlessly pulled the D lever election after election, this is going to be their road-to-Damascus awakening.

    1. For a lot of landlords who mindlessly pulled the D lever election after election, this is going to be their road-to-Damascus awakening.

      One would hope, but given how they repeatedly voted D as their property taxes soared into the stratosphere and they tolerated all sorts harassment from city hall, I have my doubts. Because voting R is racis’ or something. Maybe after the foreclosure auction it might finally sink in.

      1. Talking about Portland again!? Seriously, though, it’s an apt description here. I can’t wait for a particular tax/fee raising commissioner to be thrown out on her arse this November. In addition to escalating property taxes and new taxes on landlords, a “wealth” tax on households over $200K just passed in May’s special election, to pay for the homeless. 🙄

        1. a “wealth” tax on households over $200K just passed in May’s special election, to pay for the homeless.

          $200k in income, or wealth?

          So glad I chose Seattle over Portland back in 2008….

          1. Ah, sorry, good question. A tax on “wealthy households” earning over $200K.

            “Measure 26-210 was projected to raise $2.5 billion with a 1 percent marginal tax on couples earning more than $200,000 and a 1 percent tax on profits for large businesses.”

          2. Interesting how the tax on business is net, but on individuals is gross…

            I expect high income earners will be driven north to WA. So what if you pay tax on what you buy…if you’re a high-income earner, you earn far more than you spend in a given year…

          3. Perhaps the write-ups are a mess because the new law is a mess? I’m not going to take the time to research it, but I wouldn’t be surprised if it were poorly written and rushed onto the ballot for political reasons. No worries, the rich have plenty of lawyers to find the loopholes. 🙂

          4. “Perhaps the write-ups are a mess because the new law is a mess?”

            Did you also see that they wrapped it up in the name “HereTogether”? 🤮

            If we were truly “HereTogether” *every* income level would pitch in to help instead of voting for other peoples’ money to do so.

  12. Surround yourself with people who reinforce your decision to purchase your new home and make you feel as special as your new home is to you.”

    Blocking out truth-tellers won’t change the fact that anyone who buys a shack on the cusp of the bursting of the Fed’s Everything Bubble is a classic fool who will face financial devastation.

  13. Silver is on another tear. Up almost 7% today. Bitcoin up 14%. Gold is the tortoise today, slow and steady up. I honestly don’t know what’s going on. 😕 I don’t think it’s just Robin Hoods in the ETFs. Silver eagles have a 37% ($9) premium!

    1. I honestly don’t know what’s going on.

      Seriously? Okay, here’s what’s going on: the criminal private banking cartel in charge of our money issuance is hurtling us down the road to Weimar 2.0. More and more former sheeple are waking up to that fact and are protecting their wealth accordingly.

      Remember: If you don’t hold it, you don’t own it. EFTs with paper (make-believe) gold or silver are so substitute for possessing physical gold, silver, or platinum when the Fed’s house of cards comes crashing down.

      1. If the price of gold is responding to the fed, then why didn’t gold jump in April/May, which is when the Fed did most of its printing? Are people catching on to this just now?

        1. Good question. I think people *say* they are doing it because of the Fed but actually it’s because they see such stupidity happening that they want an insurance policy against inflation. In April they weren’t sure which way things were going to go and they were still looking for a deflationary depression.

        2. Back then, the COVID-19 outbreak was supposed to be over by now with a V-shaped recovery underway. Seems like that plan didn’t come to fruition. So now all we have to carry us through is the Fed’s Unlimited Quantitative Easing program.

          1. This. Now we’re gonna get another multi-trillion dollar “stimulus package”, which means we’ll probably get another one this fall. There was an interesting headline today in the Dumver Post:

            “Frightening.” “Terrifying.” Coloradans brace for fiscal fallout as federal $600 weekly unemployment aid ends

            So now, people are paid more to not work than to work, and it’s “terrifying” to suggest that such largess should end.

            When I was laid off in 2001, right after 9/11, I hustled to find a new job and accepted a really crummy one which I hung onto for 2 years until I could finally get a better job. There was no $1000+ a week for me while I was unemployed.

            UBI is going to sneak in through the back door and it’s going to be more generous than what Andrew Yang was proposing. $20 loaf of bread, here we come.

    2. It’s the FED. Their deranged printing is blowing bubbles everywhere, and there’s a flight to perceived safety of precious metals, with speculators running to hop on board. We could see a blow-off top in silver at some point.

      1. It’s the FED.

        Absolutely. But you won’t read that in the MSM, as it contradicts the narrative that there is such a thing as free money.

        Andrew Yang was back on his UBI soapbox today:

        Yang’s signature issue is universal basic income, and it has come back into focus because of the pandemic-fueled mass unemployment. Yang said the rapid shifts only increases the need for the United States to adopt UBI, a controversial plan that would give every adult $1,000 a month.

        $1000 a month? I’ll bet that when they make their push for this, it will be a lot more. Then we’ll get to hear the belly aching about rising prices for staples. If the Dems are in charge they will probably create price controls, which will guarantee empty shelves at the store.

        1. In the 2010 census, there were 234,564,071 adults (18+) in the US. (Certainly there are more now.)

          234,564,071 x $12,000/yr = $2,814,768,852,000.

          $1K/month for each adult would cost over $2.8 trillion per year.

          1. I’m certain that President AOC won’t see a problem with that. It’s fair and just, after all; and opposing it means you’re racis’ and a fascist,

        2. I’m sorry but given the cost of living a thousand a month would be living in poverty.

          Why do they keep coming up with stuff that doesn’t make sense. Bring back all the jobs lost and the manufacturing lost to Globalism. .

          And it’s absurd to think that a gutted USA will be able to sustain all these Commie programs.
          Service jobs aren’t going to cut it. And the gouging monopolies have no problem looting the younger generations like on overpriced health care and education. And real estate is just a rip.
          They should rebel against the Political class that sold everybody out to Globalism and monopolies . Instead they listen to Commie bribes that they wouldn’t be able to deliver on anyway..

          1. I’m sorry but given the cost of living a thousand a month would be living in poverty.

            It’s going to be more than that. We’re already giving the unemployed $1000 a week and to suggest that they get less is unthinkable.

          2. It’s going to be more than that. We’re already giving the unemployed $1000 a week and to suggest that they get less is unthinkable.

            How did we go from a minimum wage of under $8 per hour to $52,000 per year for staying home? This is fawking nuts. I can’t believe how far this country has fallen in so little time.

          3. I can’t believe how far this country has fallen in so little time.

            I’m trying not to focus on it too much, because when I do, I get so depressed. 🙁

        3. $1000 a month? I’ll bet that when they make their push for this, it will be a lot more.

          Especially if they are already used to $600/week.

    3. Jul 10, 2020,11:06am EDT
      “Modern Monetary Theory” Goes Mainstream
      Nathan Lewis, Contributor
      Policy
      I write about monetary and tax policy for the 21st century.
      More From Forbes

      There’s nothing new about “modern monetary theory.” And, actually, a lot of it is true. You can print all the money you like — that is, increase the supply — as long as there is a corresponding increase in demand, and the result will be a currency of stable value. Between 1775 and 1900, the dollar base money supply of the United States increased by an estimated 163 times, but the value (vs. gold) was nearly unchanged. That’s right — a 163-times increase in the quantity of money did not result in any change in the value. But, this was spread over 125 years, a time when the United States experienced enormous economic growth.

      Things get tricky when the supply is increased in excess of demand, leading to a decline in currency value. This can come about from two ways: a dramatic increase in supply, or a dramatic decrease in demand. A “dramatic decrease in demand” is sometimes called a “loss of faith,” and commonly happens when a currency loses value (on the foreign exchange market for example), and there is no coherent official response; or, the official response is actually in favor of the decline. Who would want to hold that currency? Obviously, nobody. Thus, demand collapses; and the currency’s value falls. This can happen even when supply is unchanged. This is what happened during the 1933 dollar devaluation in the U.S., or the collapse of the Thai baht in 1997-98. (I look into many such episodes in my book Gold: The Monetary Polaris.)

      1. I had the pleasure of experiencing 50%+ inflation in Mexico, along with price controls. It was fun going to the supermarket, wondering if this week there would be cooking oil, milk or sugar on the shelves. It was amusing to see the goods rematerialize after the official price was raised.

        Another fun one was the size of bolillos, the small french style rolls that are considered a staple in Mexico. There was an official price for them which stipulated how many grams they weighed. As inflation ate away the bolillos at the panaderias would start to shrink, which was illegal, but the government for some reason did not enforce. Then when the official price was raised they went back to the official weight, and the process would repeat.

        Some staples, like corn tortillas and beans, were subsidized. Tortillas were on occasion fortified with soy meal. The government would make the tortilla dough (nixtamal) and sell to tortillerias. Curiously, soft drinks were also subsidized.

        The government used to run grocery stores called “Conasuper”, which sold substandard goods at prices much lower than regular supermarkets. It was a lifeline for the lower class back then, a “better than nothing” option for many.

          1. I was a teen at the time. But I recall that my dad, who had an injection molding business, was able to get some sort of low interest government loan, which he used to buy a mountain of granular plastic (polystyrene, I believe). He then proceeded to make more money selling the raw plastic than the molding business made. He would also buy Mexican gold coins (Centenarios).

            I was in Mexico during the 1976 devaluation. when the peso lost about 40% of its value, but after that things stabilized thanks to rising oil production in Mexico. I had already left, to study in the US, when the really big devaluations hit the peso.

            I watched, mesmerized, as the peso collapsed from 20 to a USD, to 100, to 200, 500, 1000, and beyond.

          2. That’s fascinating information…thanks.
            I wonder how many Americans are currently using small business loans to invest in buying physical materials as an inflation hedge, like your dad did?

            I suppose there’s always the option to go long into cryptocurrencies if the dollar seems like a questionable store of value.

            Market Extra
            Bitcoin surges over $10,000, could surpass $15,000, digital-currency experts say
            Published: July 27, 2020 at 8:41 a.m. ET
            By Mark DeCambre

            Bitcoin prices were taking flight on Monday, pushing the digital currency to the highest level in about two months and ending the long dormancy of the world’s No. 1 virtual asset.

            Bitcoin, the largest and most influential cryptocurrency, shot past the key $10,000 resistance marker—all eyes are now on the critical $10,500 level,” wrote Nigel Green, chief executive and founder of deVere Group, a financial firm, advising some $12 billion.

          3. “Bitcoin…could surpass $15,000, digital currency experts say…”

            LOLZ @ “digital currency experts.” What a bunch of sh!tbags.

          4. I wonder how many Americans are currently using small business loans to invest in buying physical materials as an inflation hedge, like your dad did?

            I knew people who used whatever cash they had to stockpile rebar, sacks of cement, even bricks. It would track inflation. In Mexico annual bonuses (20 days pay) and profit sharing were mandatory. Mex.gov workers used to get 3 month extra pay at the end if the year. Some of it was burned for Christmas (knew guys who would buy cases if hard liquor) but they would “invest” most of it in physical materials. Save it in the bank? Forget that!

          5. @In Colorado – very interesting!

            I think today, people with any extra money are being led to think they have put it ‘in the market’ (or maybe crypto) to have a chance to track inflation or better.

            I was just 10 in ’76, but I do recall that we, and everyone else I knew, didn’t have / own as anywhere as much ‘stuff’ as we do today. But perhaps my perception is skewed by growing up in small town Michigan which was predominantly blue-collar.

            I would imagine that it was ever more pronounced in Mexico, but that’s being presumptuous of me. You take on it?

            Anyway — where I’m going with it — I’m wondering if there is there anything that average person today could/should stockpile in a similar manner to what you observed, or have our changes in ‘relative wealth’ to money, and our fantastic logistics/just-in-time/global distribution system reduced the usefulness of doing that?

          6. You take on it?

            I was talking about middle class Mexicans. The poor could barely feed themselves, never mind hoarding rebar or gold and silver coins.

            It could be hard find stuff to hoard that would pace inflation. Of course, when it was 50% or higher, everything rose in price, though it might not keep up with inflation. Like used cars, which would appreciate, but not keep up with inflation.

            The plastic granules thing worked for my dad because it appreciated faster than the interest on the subsidized loan. He originally bought the plastic for the factory, as he was allowed to import it and at times it could be hard to find. But then reselling it became a better biz than using it.

      2. “You can print all the money you like — that is, increase the supply — as long as there is a corresponding increase in demand, and the result will be a currency of stable value.”

        There’s always a demand for money. Due diligence used to determine who was able to borrow it. But during the last forty years the money lenders have successfully lobbied the government into absorbing their bad debt and lowering the interest rates to accommodate those who borrowed too much. And top it all off by adding this pandemic into the economic stew, and millions are now staring at their end-game.

  14. Denial ain’t a river in Egypt.

    In One Chart
    As bleak COVID-19 headlines mount, investors worry only about the facts ‘they can live with,’ analyst says
    Published: July 27, 2020 at 3:59 p.m. ET
    By Shawn Langlois
    ‘Investors seem still caught in a past-tense, future-perfect kind of mood’
    MarketWatch photo illustration/iStockphoto

    … if investors are worried about getting caught wrong-footed, you wouldn’t know it from this chart from Axioma, which shows that they are “uncharacteristically positive in the face of rising uncertainty about the economic rebound in the second half of the year”:

    The chart shows Axioma’s recently created Qontigo ROOF score, an acronym that stands for “risk-on/risk-off.” It’s basically a gauge of how bullish investor are at any given moment.

    As you can see, bullishness is currently running high.

    “Investors seem still caught in a past-tense, future-perfect kind of mood having decided that they should not worry about all the facts, only those they can live with,” Axioma analysts wrote in a note this week about the divergence between market performance and fundamentals.

    In their view, quantitative easing is trumping the presumption of economic fragility.

    “The second wave of new infections is threatening large swath of the global economy and raising the probability of second lockdowns,” the analysts wrote. “But like the mother of a drug dealer, or the neighbor of a serial killer, investors seem to be the last to know, preferring instead to focus on the stimulus packages this will invite.” So it’s “BUY, BUY, BUY!” regardless.

    Bottom line: The consensus, according to Axioma, is that even if the big earnings lineup doesn’t support the current valuations, easy money from the Fed and/or a new stimulus package will.

    “Risk tolerance continues to rise and risk-aversion decline, despite a worsening COVID-19 narrative as investors recreate their own ‘fuggedaboutit’ moment,” the analysts said.

    1. Maybe they should have spent the free money on paying the rent instead of toys, weed and ubereats.

      1. Then again, if you realize you aren’t going to be able to both pay the monthly and eat, you may as well follow the George Best strategy you mentioned:

        I spent a lot of money on booze, birds and fast cars. The rest I just squandered.

        George Best

        1. I once saw a George Best T-short I almost bought some years ago. It said:

          Maradona: Good
          Pele: Better
          George Best

        2. Then again, if you realize you aren’t going to be able to both pay the monthly and eat

          Why not. if they are getting more then when they worked?

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