Skip to comments.David Stockman: You're Now In The "Bernanke Bear Trap"
Posted on 02/09/2013 9:14:19 AM PST by Para-Ord.45
- Fed is serial bubble machine
-Entering housing bubble 2.0
-When interest rates go up which they must , fast money will scatter and bubble will splatter.
-Low interest creates artificial demand.
-Phoenix and Las Vegas seeing the biggest speculation. 8% increases in 1 month crazy, historical is 3 to 4% tops.
-Rates rise in the next 1 or 2 years due to currency wars now underway.
CNBC VIDEO AT LINK
Stockman called out this scam in the early eighties, and Reagan “took him to the woodshead”. Stockman called for tax increases back then...and pointed out that deficit spending had to be curtailed...he was publically almost booted out of the GOP.
It’s payback time.
Thanks for the bit of history.
Actually those foreclosures are being scooped up en masse, but then money is put into them to prepare them to be rentals.
There is no avalanche of homeowners wanting to be homeowners again. The price increase is strictly and only a result of demand for the house so that it can be rented out.
It’s similar to the stock market. Volume is microscopic. Home sales rates are at 1998 levels. Price moves on such low volume really doesn’t mean much.
The government is being used as a clearing house, tax payer paid, to prime spending and making the economy look good for Obama. It is as simple as that. The endless borrowing by the government allows it. However one cannot pay for corruption indefinitely because corruption lives its own legacy of destruction. Ultimately the economy will become potemkin and crap will be sold.
When he was elected after the crash which mysteriously surfaced when Mc Cain was ahead, the crash continued unabated. This TARP was to save his arse.
We are basically raking the credit card debt with no end in sight and not paying interest rates on it or not willing to. This will end soon when the Chinese are going to ask for some dividends and inflation will go up, and a policy of high dollar is going to go on, just like the French had a strong currency policy in order to finance German reunification and the EUSSR project.
Stockman confused me when he stated rates are going to go up in 2 years which will pop the whole bubble including the new housing speculation, but at the same time we`re beginning a currency war which means rates can go into negative territory.
Any thoughts ?
I am no financial whiz, but it seems I’ve been hearing “interest rates HAVE to rise” for about ten years now, and I’m still earning about the same rate at my bank as my mattress would pay.
No matter what the tax rates have been, even at 70 and 90 percent top marginal rates, the Federal Gov has collected about 18% GDP as revenue. It’s known as Hauser’s Law. Christine Romer & hubby wrote about what happens when taxes increase, GDP falls.
We don’t have a tax revenue problem, we have a spending problem!
I’m of extreme opinions on this stuff.
Under no circumstances will Bernanke allow rates to rise. The entire QE mechanism is designed to bring rates down. It’s not just a question of how many bonds he buys. It’s also a question of what price he pays for them. There is nothing to stop him from getting a quote from the Primary Dealer and then saying, nah, I’ll pay a higher price than that quote (higher bond prices drive yields down). The PD is not going to say no to a customer that is willing — demands — to overpay.
And so rates will go down. In fact, I expect negative rates within a year or two. As for what this does for housing — nothing. If mortgage rates were zero, people still would not buy houses. It’s an illiquid asset, and banks are not anxious to lock in 30 year loans at nearly 0%.
Frankly, I think the direction for society is down, more or less forever. It is driven thus by oil scarcity and the energy required now to get energy out of the ground. That ratio has exploded. We used to just build a little 30 foot derrick, drill a hole and put oil capture piping over the gusher. Now we build a 40 story tall structure, in parts, ship them to the coast, assemble them at sea, put a 20,000 horsepower marine engine on it, helicopter a crew out to it, drive it 6000 miles and then drill in 2 miles of water to the seabed, and 5 miles under that. Then we try to get capture infrastructure in place hundreds of miles at sea.
THAT is why civilization is disintegrating. The energy ratio has gone to hell — and it’s never coming back.
I tend to agree.
But the yield on the 30 yr is at an 8 month high so mortgage rates must necessarily be about 1 to 2 points higher.That`ll force the Fed to QE even harder. If the yield goes to 5% then the housing bubble 2.0 will pop.
So the elite can pick their poison. QE/ZIRP to infinity and effective bankruptcy or allow a free market correction. Both are going to hurt, alot.