Rolling US Economy Into The Shitbin Thread

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http://bigpicture.typepad.com/comments/2007/10/more-inflation.html

El Tomboto, Thursday, 18 October 2007 23:44 (twelve years ago) link

personally I'm applying for a civil servant position ASAP

El Tomboto, Thursday, 18 October 2007 23:45 (twelve years ago) link

Just FYI, during the 1930s depression, many civil servants were paid with vouchers rather than cash, because local governments were unable to collect property taxes and their receipts fell into the shitbin.

Aimless, Friday, 19 October 2007 00:12 (twelve years ago) link

Economy's doing poorly enough as it stands, why do we deliberately want to roll it into the shitbin?

Abbott, Friday, 19 October 2007 00:14 (twelve years ago) link

Because that way Hillary can rescue us all.

Dandy Don Weiner, Friday, 19 October 2007 00:17 (twelve years ago) link

lol property taxes

El Tomboto, Friday, 19 October 2007 00:18 (twelve years ago) link

shitbin's a great word, BTW.

Dandy Don Weiner, Friday, 19 October 2007 00:20 (twelve years ago) link

you been loving my thread titles lately

El Tomboto, Friday, 19 October 2007 00:26 (twelve years ago) link

i came to this country some time ago with little more than a crippling debt burden in GB Pounds and the shirt on my back. i used to have to send back $1,200 each month to pay off my UK debt, and now I'm sending back over $1,400 to cover the same amount of debt repayment. that's two and a half thousand dollars disappearing from my tiny disposable income every year, for no explicable reason. i *heart* the decline of the US economy.

Roberto Spiralli, Friday, 19 October 2007 00:27 (twelve years ago) link

anyway why start this thread now because the bit where ritholtz points out that domino's pizza can't print new menus fast enough to keep up with inflation was pretty fucking amazing

I wish rasheed wallace was still around to show us the latest and greatest exploding bubble blogs

El Tomboto, Friday, 19 October 2007 00:28 (twelve years ago) link

wow Roberto that was some shitty timing, that sucks

El Tomboto, Friday, 19 October 2007 00:29 (twelve years ago) link

This was in the paper today:

Mortgage defaults

Hit an annual rate of 1.5 million in September. That compares with 900,000 last year from fewer than 800,000 in 2005. At the current rate, more than one million Americans will lose their homes to foreclosure, making this the worst housing recession since the Second World War.

Housing starts

Sank to a 14-year low of 1.19 million in September. Starts are a vital economic engine, creating jobs and growth as people stuff their homes with sofas and TVs. Starts peaked at 2.3 million in early 2006, and the decline will be a drag on the rest of the economy until the slide stops.

Mortgages

A quarter of the roughly 50 million U.S. home mortgages are subprime. That's seven times the number of high-risk mortgages there were in 2001. That means that many more marginal homeowners have mortgages, making it far more likely they'll wind up in default.

House prices

Fell 3.2 per cent in the second quarter. Prices are falling faster and more broadly than they have in decades, according to the closely watched Case-Shiller index.

http://www.theglobeandmail.com/servlet/story/LAC.20071018.IBUSECONOMY18/TPStory/Business

everything, Friday, 19 October 2007 00:29 (twelve years ago) link

where the hell is rasheed anyway?

economic blogs I read (they're all fairly liberal):

http://calculatedrisk.blogspot.com/
http://angrybear.blogspot.com/
http://delong.typepad.com/sdj/
http://www.marginalrevolution.com/marginalrevolution/
http://bigpicture.typepad.com/
http://www.janegalt.net/

Dandy Don Weiner, Friday, 19 October 2007 00:37 (twelve years ago) link

In regard to inflation, in the USA during the past three years inflation has been soaring - but almost entirely in the housing sector. The fact that people are encouraged to see their houses as investments rather than as expenses doesn't mean that skyrocketing housing costs weren't inflationary. They were.

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008. As it has for the past 30 years, the official CPI will understate the real inflation rate. It was rigged under Reagan so that government entitlement programs indexed to the CPI would not increase at the true pace of inflation.

If Bush continues to shovel shit on the dollar right up to the end of his term in January 2009, the inflation rate could hit 15%-20% by 2010.

Aimless, Friday, 19 October 2007 00:55 (twelve years ago) link

There are some good economics articles put up here as well:
http://www.VoxEU.org

stet, Friday, 19 October 2007 01:02 (twelve years ago) link

Which shit on the dollar are you referring to?

Dandy Don Weiner, Friday, 19 October 2007 01:02 (twelve years ago) link

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008.

lol

aaaaaaaaaaaaaaaaaaaaaaaaaa, Friday, 19 October 2007 06:11 (twelve years ago) link

this is why i live in canada!

J0rdan S., Friday, 19 October 2007 06:13 (twelve years ago) link

oh wait.

J0rdan S., Friday, 19 October 2007 06:13 (twelve years ago) link

Guys, this is a good time stay in academia right?

Catsupppppppppppppp dude ่Œ„่•ƒ, Friday, 19 October 2007 11:51 (twelve years ago) link

It's a good time to learn a European language.

Nubbelverbrennung, Friday, 19 October 2007 13:33 (twelve years ago) link

Prime shit examples:

When Bush was elected in 2000, the federal budget was in surplus and the national debt was being paid down. Had this state of affairs continued, as projected, it would have led both to lower interest rates and a strong dollar, together. Instead, Bush submitted a series of enormous tax cuts to the Republican-controlled Congress and lobbied them through. Immediately, the CBO's projected budget surpluses turned to projected deficits for the next decade.

Bush also initiated a war of choice, not necessity, in Iraq. This war has already cost well over $700 billion. Yet, Bush insisted on making his tax cuts permanent. Overall, the national debt has increased under Bush by about $2 trillion in seven years. This represents a difference of about $3 trillion of debt from what was projected at the start of his first term.

Because, due to Bush's tax cuts and other policies, the Federal government was in a far weaker position to stimulate the economy when the recession started after 9/11, almost the entire stimulus was delivered via lower interest rates. Because these rate cuts were artificial, and not based on a stronger dollar, this stimulus not only inflated the current housing bubble, but it also undercut the dollar even more than the ballooning national debt did.

Now the dollar is at an all-time low against the euro and the canadian dollar. However, the incomes of the top 10% of American households have increased at a good clip, while the lower 50% of households have seen a decrease in income after inflation. This is largely thanks to Bush's shitty policies. I expect more of the same mismanagement until he is gone.

Aimless, Saturday, 20 October 2007 18:36 (twelve years ago) link

I agree with everything you've just said. You're predictions still seem a tad extreme on the downside though, if I may so.

aaaaaaaaaaaaaaaaaaaaaaaaaa, Saturday, 20 October 2007 18:50 (twelve years ago) link

i wonder if income inequality will ever arrive as a political issue in this country. americans tend to not begrudge the rich - so it'll have to be more of a "for everyone's good" type of angle. no?

jhรธshea, Saturday, 20 October 2007 18:54 (twelve years ago) link

I remember the 1970s and early 80s quite well. Back then people couldn't belileve it, either. Bush has done a bangup job of recreating many of the same policy errors under Johnson and Nixon that led to raging stagflation back then, except the underlying economy is now weaker than it was in the 1970s and the oil shocks we are likely to get are not political, as when OPEC was formed, but structural.

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

Aimless, Saturday, 20 October 2007 19:07 (twelve years ago) link

Anyone want to join my modern-day James Gang? We shall ride across the lower Midwest, robbing and pillaging.

milo z, Saturday, 20 October 2007 19:09 (twelve years ago) link

sounds fun

jhรธshea, Saturday, 20 October 2007 19:13 (twelve years ago) link

Sorry, I don't want to relocate. But this scheme sounds ripe for franchising.

Aimless, Saturday, 20 October 2007 19:14 (twelve years ago) link

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

-- Aimless, Saturday, 20 October 2007 19:07 (14 minutes ago) Link

The coming of $100/barrel oil is not Bush's fault. It's yours and mine and everyone else's for using too damned much energy. I agree Bush could and should have done a lot more with policy to encourage energy efficiency, but there's little he could have done to stop oil's eventual rise to that price level.

Hurting 2, Saturday, 20 October 2007 19:26 (twelve years ago) link

Part of the pricing of oil represents the weakness of the dollar. This hurts the USA more than it does other countries. US citizens are paid in dollars and the US government collects revenue in dollars, so they are stuck. EU countries can use euros to buy increasingly cheap dollars, so they don't see the same rise in prices as we do. The weakness of the dollar is mainly Bush's fault.

Aimless, Saturday, 20 October 2007 19:31 (twelve years ago) link

The US also uses way more oil than other countries.

Hurting 2, Saturday, 20 October 2007 19:33 (twelve years ago) link

he could have done to stop oil's eventual rise to that price level.
Not starting a war in Iraq would definitely have helped here.

stet, Saturday, 20 October 2007 19:57 (twelve years ago) link

arrgh, if that won't work then
http://calculatedrisk.blogspot.com/2007/10/imf-mortgage-reset-chart.html

El Tomboto, Monday, 22 October 2007 17:47 (twelve years ago) link

tombot u r freakin me out

gff, Monday, 22 October 2007 17:50 (twelve years ago) link

i hope my small apartment + modest savings plan + job in "information services" is enough to weather the shitstorm, if it comes. i got myself out of credit card debt a few months ago, at least

gff, Monday, 22 October 2007 17:53 (twelve years ago) link

well if you can hold down a job and don't have to worry about an ARM reset you should be okay, it's the homeowner with kids and a subprime loan and two cars who ought to be shitting themselves

El Tomboto, Monday, 22 October 2007 17:58 (twelve years ago) link

apart from some student loans and binging on credit cards over a few years, i'm kind of debt phobic.

which has actually made me lose out over the past several years, i realize, since i pay for EVERYTHING with a debit/check card... i could have just paid that balance on a credit card with some rewards scheme and has some air miles or something

gff, Monday, 22 October 2007 18:00 (twelve years ago) link

rolling gff personal finances into the shitbin thread, ha

gff, Monday, 22 October 2007 18:01 (twelve years ago) link

This will give you a boner Tombot

http://nymag.com/guides/money/2007/39952/

Dandy Don Weiner, Wednesday, 31 October 2007 11:30 (twelve years ago) link

the economy increased by 3.9% this quarter! bull market forever, baby. economy's better than ever. golden age.

yet me and so many people I know are getting laid off next month. granted we're all in the writing/design field, but urhhhhh. gggg.

burt_stanton, Wednesday, 31 October 2007 14:58 (twelve years ago) link

http://nymag.com/guides/money/2007/catastrophist071105_560.jpg
http://nymag.com/guides/money/2007/catastrophist071105_2_560.jpg

^^^ lol

most of that guy's scenario is not really news to regular bigpicture/CR readers I don't think. But #5, the "we don't pay attention" thing, yeah, well, evidently the awareness campaign is underway, but hell if the big players are paying attention.

He also leaves out the approaching demographic catastrophe as millions of inexperienced thirtysomethings and even some late-twenties kids are forced to move into arguably tougher jobs that the boomers have been holding for two decades. Beyond the social security and healthcare costs associated with mass retirement, I don't really know if this generation has the work ethic and definitely not the rolodex to just start filling in and not fuck up royally. too busy updating their linkedin pages.

El Tomboto, Wednesday, 31 October 2007 15:11 (twelve years ago) link

can someone explain what "being upside down on your mortgage" means, in plain English?

Tracer Hand, Wednesday, 31 October 2007 16:14 (twelve years ago) link

essentially, owing more than your home is worth.

Dandy Don Weiner, Wednesday, 31 October 2007 17:10 (twelve years ago) link

also Tombot I'm not going to blame this generation as much as I blame their parents.

Dandy Don Weiner, Wednesday, 31 October 2007 17:11 (twelve years ago) link

isn't that the way people buy homes? by paying for the privilege of a loan?

Tracer Hand, Wednesday, 31 October 2007 17:12 (twelve years ago) link

When you enter into a contract with a bank for a mortgage, both you and the bank assume that the property value will not plummet. The bank doesn't want you to default any more than you want to default. But if for whatever reason you need to sell your home, and you can't get what you owe on it, then you will owe the difference to the bank. And the bank knows that when that happens, you probably will not have enough assets to cover the difference.

Predatory-type loans (which seems like a nebulous description to me) typically compound the problem because they have higher transaction rates (points, etc.)

Dandy Don Weiner, Wednesday, 31 October 2007 17:17 (twelve years ago) link

oh certainly! well played baby boom letting healthcare slide for the 20 years you've owned the electorate

El Tomboto, Wednesday, 31 October 2007 17:18 (twelve years ago) link

yeah Tracer it's also called "negative equity"

El Tomboto, Wednesday, 31 October 2007 17:19 (twelve years ago) link

if the argument for bailing out landlords is that if we don't then wider society will suffer, then here is an industry i would bail out before landlords.

https://www.washingtonpost.com/opinions/child-care-centers-have-already-been-reopening-the-results-are-troubling/2020/07/13/3ce91a00-c53b-11ea-b037-f9711f89ee46_story.html

Some 40 percent of the child-care providers that existed pre-pandemic expect to close permanently unless they get additional public assistance soon, according to a National Association for the Education of Young Children survey of more than 5,000 child-care providers released on Monday.

๐” ๐”ž๐”ข๐”จ (caek), Wednesday, 29 July 2020 21:54 (two weeks ago) link

I guess that's possible. IDK how it works in LA -- there are places that reassess the second a property changes hands and places that don't.

โ€• longtime caller, first time listener (man alive), Wednesday, July 29, 2020 2:38 PM (eleven minutes ago)

it depends on the terms of the transfer -- you see this in California (because of Prop 13, which people keep valiantly trying to repeal and failing because there are still enough Reagan-era conservatives in this state) a bunch where property is transferred to family members and are not reassessed.

In terms of this hypothetical fourplex, the landlord is probably paying for water, garbage service, and potentially some of the electric bill on the common areas -- that's probably another couple thousand. There is insurance -- add at least $1k to that. They probably also (at least they are supposed to) pay City business tax on the rental -- different cities tax rental property way more than other types of business income. We don't know about the mortgage or maintenance costs. It is possible that the landlord has some mortgage/debt on the property from capital improvements made that isn't acquisition debt. Considering this is the LA area, the fourplex is potentially a soft-story building that could require/have required a retrofit that isn't/wasn't cheap.

sarahell, Wednesday, 29 July 2020 21:58 (two weeks ago) link

i don't think the implication of that tweet is that the landlord is that it's $70k - $5.5k of pure profit.

๐” ๐”ž๐”ข๐”จ (caek), Wednesday, 29 July 2020 21:59 (two weeks ago) link

the point is that the rhetoric around "mom and pop landlords" used to tug at the hearstrings is bullshit.

๐” ๐”ž๐”ข๐”จ (caek), Wednesday, 29 July 2020 22:00 (two weeks ago) link

my City Councilperson uses that rhetoric all the fucking time tbh -- there is also (at least here) a racial component because the "mom and pop landlords" of District 3 represent a bulwark against the whitening of the district.

sarahell, Wednesday, 29 July 2020 22:09 (two weeks ago) link

Yeah same down here.

Iโ€™ll try to dig up the stats but I feel like I remember reading that a majority of LA politicians and the California state assembly are landlords, which is 1) how they end up thinking of landlords as people who are mostly โ€œregular peopleโ€ doing it as a side hustle 2) also why they are super into transferring wealth to property owners at every opportunity, even if it means us being like 47 in the nation for fundings public education, because it personally benefits them.

๐” ๐”ž๐”ข๐”จ (caek), Wednesday, 29 July 2020 22:19 (two weeks ago) link

there was a lot of discussion on this accounting professionals group I'm in about whether landlords qualified for PPP loans. It was fairly simple in the case of individuals, but a lot of real estate is held in Partnerships or S-Corps and those are more complicated.

sarahell, Wednesday, 29 July 2020 22:24 (two weeks ago) link

btw

Man allegedly decapitated landlord with samurai sword over rent dispute https://t.co/jFALU3HsUM pic.twitter.com/jMLUhrAH8u

— New York Post (@nypost) July 29, 2020

mookieproof, Wednesday, 29 July 2020 22:30 (two weeks ago) link

ah yes! that memetic content!

sarahell, Wednesday, 29 July 2020 22:31 (two weeks ago) link

damn, all those bridge points gone to waste

longtime caller, first time listener (man alive), Wednesday, 29 July 2020 22:44 (two weeks ago) link

lol "master points"

longtime caller, first time listener (man alive), Wednesday, 29 July 2020 22:45 (two weeks ago) link

I got to say, there seems to have been a handful of samurai sword killings in the past few years.

I guess the classics never really go away.

earlnash, Wednesday, 29 July 2020 22:51 (two weeks ago) link

In the early 2000s our (mom sans pop) landlord kept our security deposit when we moved out and after a year or three of telling us she was having problems and would get us the money, we finally took her to small claims court. She never showed, so we got a default judgment and luckily got a lien on the property. We then had to wait another year or two until her property was sold and were able to enforce the lien (with interest). If she had just returned our calls and been straight with us, we would have been more than happy to work out a payment plan (yeah right).

Tลne Locatelli Romano (PBKR), Thursday, 30 July 2020 00:06 (two weeks ago) link

don't want this to get buried because it is otm and has been previously discussed in some recent thread

DJI
Posted: 29 July 2020 at 21:39:13
Seems to me if you cancel rents for people, you should also freeze mortgage payments for the landlords. Seems simpler than trying to determine who is worthy of the relief.

yes this is it. itโ€™s not complicated. is there a mortgage โ€œholidayโ€ in the us at all? in the uk there is until end of october i think (was extended from july)

โ€• Li'l Brexit (Tracer Hand), Wednesday, July 29, 2020 2:46 PM

but bitter sad LOLs at the idea of the US doing anything as sensible as a "mortgage holiday", easier to dump 28 million people out on the streets

sleeve, Thursday, 30 July 2020 00:20 (two weeks ago) link

I feel like people were talking about pausing the mortgages at the very beginning and it seems like a good idea and then... that talk just stopped somehow.

Guayaquil (eephus!), Thursday, 30 July 2020 00:27 (two weeks ago) link

"it's going to be over soon, there's no point!"

XVI Pedicabo eam (Neanderthal), Thursday, 30 July 2020 00:29 (two weeks ago) link

mortgage stuff was left to the banks -- some banks have made arrangements with borrowers -- again, the mortgage issue isn't the sole factor in re preventing evictions of tenants unable to pay rent.

sarahell, Thursday, 30 July 2020 00:45 (two weeks ago) link

on a macro level there is the issue of banks having enough cash/reserves to legally make loans -- which we saw with the first wave of PPP loans.

sarahell, Thursday, 30 July 2020 00:46 (two weeks ago) link

if I was inclined to doompost, which I am not, I would be much more concerned about evictions than secret police or whatever

the quar on drugs (Simon H.), Thursday, 30 July 2020 03:32 (two weeks ago) link

you're not??

all cats are beautiful (silby), Thursday, 30 July 2020 03:34 (two weeks ago) link

tell that to 2016 simon

all cats are beautiful (silby), Thursday, 30 July 2020 03:34 (two weeks ago) link

fuck that guy

the quar on drugs (Simon H.), Thursday, 30 July 2020 03:35 (two weeks ago) link

word

all cats are beautiful (silby), Thursday, 30 July 2020 03:35 (two weeks ago) link

interest rates near zero means that those with assets can buy up distressed assets as rapidly as possible. the relentless consolidation of wealth finds no obstacle in a mere global pandemic.

the unappreciated charisma of cows (Aimless), Thursday, 30 July 2020 15:49 (two weeks ago) link

pandemic is accelerating every bad feedback loop

Give me a Chad Smith-type feel (map), Thursday, 30 July 2020 15:57 (two weeks ago) link

having a "bad economy" is impossible right now because there's no such thing as an "economy", there are only the interests of rich people

Give me a Chad Smith-type feel (map), Thursday, 30 July 2020 15:59 (two weeks ago) link

and hundreds of thousands of GoFundMes ....

sarahell, Thursday, 30 July 2020 17:27 (two weeks ago) link

https://www.bloomberg.com/amp/news/articles/2020-03-26/why-landlords-might-need-a-coronavirus-bailout

i break it down as:

- "Mom-and-pop investors โ€” those who own two to four rental units" lmao
- they're highly leveraged in a risky business and i have no sympathy for them
- but as a matter of policy, with the short term health of the rental market in mind, it makes sense to cancel mortgages at the same time as cancelling rent (and i haven't seen any serious suggestions otherwise btw)

๐” ๐”ž๐”ข๐”จ (caek), Monday, 3 August 2020 03:34 (one week ago) link

good policy is often not dependent on who deserves sympathy most imo

longtime caller, first time listener (man alive), Monday, 3 August 2020 03:58 (one week ago) link

In fact many of the flaws in American policy can be traced to excessive parsing of who deserves sympathy.

longtime caller, first time listener (man alive), Monday, 3 August 2020 03:58 (one week ago) link

sure. they don't deserve sympathy but no one is suggesting they don't get mortgage forgiveness afaict.

๐” ๐”ž๐”ข๐”จ (caek), Monday, 3 August 2020 04:22 (one week ago) link

idk -- maybe my personal experience is just knowing only outliers here, but of the people I know who own two to four rental units, it's less that they own them because they said "hey i want an investment! I am going to buy residential real estate because I saw an ad about it!" and more like the units were places they used to live or a parent used to live, and instead of selling it, they held onto it. ... I guess structurally it's the same, it just seems less douchey the way I put it ... idk lol

sarahell, Monday, 3 August 2020 16:02 (one week ago) link

they're highly leveraged in a risky business and i have no sympathy for them

how do you define "risky" here? Or is the key phrase for you "highly leveraged"?

sarahell, Monday, 3 August 2020 16:06 (one week ago) link

Most landlords, after all, are not cold, unthinking corporate entities. Theyโ€™re overwhelmingly individuals and small business owners.

Seems totally possible many of them are cold, unthinking individuals and small business owners.

Guayaquil (eephus!), Monday, 3 August 2020 16:07 (one week ago) link

That said -- I truly don't see why we shouldn't simultaneously halt their eviction powers and pause their mortgage obligations. The pain of all this should be distributed as widely as possible via the tax power and not just fall on those people unlucky enough to be directly affected. Or so it seems to me.

Guayaquil (eephus!), Monday, 3 August 2020 16:10 (one week ago) link

So there are two things at play here:
one is the debt (mortgage) owed by the landlord -- which, I think I mentioned upthread -- tends to be a long-term debt that could be refinanced, such that landlords won't be looking at the balloon payments the same way things are set up for the tenants who are unable to pay rent, but would be liable for all the back rent once the moratorium expires.

The other thing is the lost income from the rent the tenants owe. So a bailout concept isn't just covering the costs of the property (including the mortgage debt), it's making up for the fact that the landlords were counting on profits from the rental units that they are currently not receiving.

sarahell, Monday, 3 August 2020 16:24 (one week ago) link

The pain of all this should be distributed as widely as possible via the tax power and not just fall on those people unlucky enough to be directly affected.

This makes excellent sense to me, but we live in a nation where a very large percentage of the inhabitants simply expect to live their lives as they always do in the middle of some of the worst hotspots in a global pandemic, who find wearing a face mask in public enclosed spaces to be an intolerable inconvenience, and they do not care much for this idea. All they want from taxes is to be taxed less and less, so long as this doesn't inconvenience them in any way at all.

the unappreciated charisma of cows (Aimless), Monday, 3 August 2020 16:25 (one week ago) link

I think from a policy perspective, we should assume that there are plenty of cold, unthinking parties involved who have assholish instincts, and policy should be crafted to prevent those assholish instincts from evicting people who lost their jobs due to Covid.

sarahell, Monday, 3 August 2020 16:27 (one week ago) link

I am fine with having the government pay landlords the lost income and cover mortgage obligations, but they should be required to retain the tenants at their previous rent (plus nominal cost of living increases) in order to receive the funds. ... Now this is a real bureaucratic problem, because of private property rights, for one, and also the fact the IRS sent stimulus checks to dead people ... dealing with getting and processing and correctly analyzing data of tenant rolls could be a real disaster.

sarahell, Monday, 3 August 2020 16:30 (one week ago) link

how do you define "risky" here? Or is the key phrase for you "highly leveraged"?

โ€• sarahell, Monday, August 3, 2020 12:06 PM (fifty-four minutes ago) bookmarkflaglink

it's risky because, assuming they have a mortgage, they have high, fixed costs relative to the income, the income is an all or nothing thing (it doesn't go up or down a couple of % each day like retail). the upside is enormous, as discussed on this thread, and extremely bad outcomes are rare. but extremely bad outcome = rare does not mean it's not risky.

๐” ๐”ž๐”ข๐”จ (caek), Monday, 3 August 2020 17:05 (one week ago) link

I was chatting about this with an accountant friend and he explained to my dumb ass that if you canceled mortgage payments the bond market would collapse which would wipe out to a of retirements and pensions. Whatโ€™s the better plan, I asked? Just give people money, duh!

DJI, Monday, 3 August 2020 17:48 (one week ago) link

wipe out a ton of

DJI, Monday, 3 August 2020 17:49 (one week ago) link

the problem with giving people money to pay rent is that it tends to make rents go up. seems like giving the mortgage lenders would actually be better in this situation.

๐” ๐”ž๐”ข๐”จ (caek), Monday, 3 August 2020 17:51 (one week ago) link

Ben Bernanke was derided as 'Helicopter Ben' for making a speech in the 00's in which he said that the best response to some economic crises was to get money into people's hands at any cost, even if you had to dump bushels of money out of helicopters. This is precisely such a situation and the deficit hawks are solidly in the "we must destroy the village in order to save it" camp.

the unappreciated charisma of cows (Aimless), Monday, 3 August 2020 17:57 (one week ago) link

I was chatting about this with an accountant friend and he explained to my dumb ass that if you canceled mortgage payments the bond market would collapse which would wipe out to a of retirements and pensions. Whatโ€™s the better plan, I asked? Just give people money, duh!

it's a little more complicated than that, retirements and pension funds are somewhat diversified, but ... again, cancelling mortgage payments is not the same as cancelling rent. There are different ways to cancel mortgage payments -- you can essentially refinance the loan so the debt is the same but just pushed back, or you can cancel the payments by reducing the loan by the amount of the payments, which would reduce the amount of assets held by the banks/lenders, which would constrict and damage things like the bond market, which is invested in mortgage backed securities, also, the lower the value of the assets held by the banks (e.g. loans), the less they can lend, thus restricting the flow of money.

sarahell, Monday, 3 August 2020 18:08 (one week ago) link

the problem with giving people money to pay rent is that it tends to make rents go up.

Increasing the money supply on the order of trillions of dollars will have some side effects, but most of that money will be sopped up by lenders or reabsorbed as taxes later on. Crises happen in present time and must be dealt with immediately. Medium term complications can be sorted out after the crisis has been addressed.

the unappreciated charisma of cows (Aimless), Monday, 3 August 2020 18:08 (one week ago) link

I'm gonna take this phrase by phrase here:

it's risky because, assuming they have a mortgage, they have high, fixed costs relative to the income,

not necessarily. The amount of mortgage debt could be quite low. Also, since the last crisis, underwriters are pretty cautious in terms of the amount of debt they will "enable" -- commercial mortgages (that is mortgages for rental property) require more documentation than a standard homeowner's mortgage ... Property owners are generally required to have a certain number of months of reserves, as well as a certain allowance for vacancies and collections, and loans are often capped at a certain percentage of the value of the property.

the income is an all or nothing thing (it doesn't go up or down a couple of % each day like retail).

not really ... rents can go up and down, some properties (commercial buildings, but these are also involved here) have tenants that pay a portion of profits as part of rent (malls tend to do this). You can do rentals by the month, or week, or convert it to an Air BnB, even (depending on local regulations)

sarahell, Monday, 3 August 2020 18:16 (one week ago) link

And on a related shitbin topic -- I am wondering about the market for re-packaged PPP loans -- is this a thing yet?

sarahell, Monday, 3 August 2020 18:24 (one week ago) link

I was rereading the UCLA report on upcoming Covid evictions and am I understanding this correctly?

The number of *just children* that could enter homelessness in the next few months is 300% the last count (66,400) for ALL people experiencing homelessness in LA County?? pic.twitter.com/nSYm2301G3

— josh vredevoogd (@jawshv) August 4, 2020

๐” ๐”ž๐”ข๐”จ (caek), Wednesday, 5 August 2020 17:57 (one week ago) link


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