AP: Good news! Banks seize record 92,000 homes last month

I'm at a loss how to even parody this kind of doublespeak anymore. First the puff:

Foreclosures down 2 percent from last year
Foreclosure filings sink 2 percent from April 2009, first yearly decline in 5 years
Millions of Americans are still likely to lose their homes in the coming years, but the foreclosure crisis is finally showing signs of subsiding...

...Banks seized a record 92,000 homes last month. [which is pretty close to the 1M that were queued up for action this year - PA]

And there are millions more potential foreclosures ahead. Nearly 7.4 million borrowers, or 12 percent of all households with a mortgage, had missed at least one month of payments or were in foreclosure as of March

Key word here - "FILINGS". They've simply queued up as many as they believe can turn relatively quickly.

There's several empty foreclosed/evicted joints within 2 minutes walking distance from me. They've been for sale for months now. Within the same 2 minute walk there's at least a dozen more the foreclosure/eviction trigger could be pulled on whenever the lender wanted to. Two joints right across the street are at least 9 months behind and have stopped paying...and this is the best street in the development.

Posted by: Purp at 09:06 AM



Comments

1
Yay!

Our economy is getting worse at a slower pace! Yay!

Posted by: Touché Turtle at May 13, 2010 09:08 AM (b5sJf)

2
I don't know about you, but I think we should be thanking Obama.

Posted by: Touché Turtle at May 13, 2010 09:08 AM (b5sJf)

3 A buddy of mine said it best: The market is not going to 'correct' itself to what it was before, the market is correcting right now.

Posted by: Zuggs at May 13, 2010 09:10 AM (FkKjr)

4 Haven't some states issued a moratorium on foreclosures?

Posted by: The Outlaw in the Heavenly Hall at May 13, 2010 09:10 AM (WVPUX)

5 This makes me ill. I know it's a vain dream, but just once I'd like someone to come on tv (or radio) and say "Yep, it still sucks."
On our local Rush affiliate this morning, the morning show had a guy talking about property taxes and how "the 1st quarter shows home values up slightly" with nary a mention of the fact that roughly 9% of that (based on the fact that mortgage applications droped by about that much) was due to the now expired Home Buyer's tax credit and would likely worse than evaporate in the next couple of months...

Posted by: Allen G at May 13, 2010 09:11 AM (hH7n9)

6 This was the inevitable outcome for the irrational exuberance of borrowing/lending to people who didn't have a realistic shot at actually paying off the mortgages they received.

I can only hope this will actually hit the NJ/NY area to drive down the cost of homes and the associated taxes.

Posted by: McLovin at May 13, 2010 09:12 AM (RwvN1)

7 It's a boom time! We're all gettin' rich!

Posted by: Guy who reads five year old newspapers at May 13, 2010 09:13 AM (MMC8r)

8 See everyone..... My Stimuli Package is working. I have also saved the housing market and fixed what Bush/Cheney Fucked Up. I am great and I automatically elect myself for another 20 year term.

Posted by: Brarack Obama at May 13, 2010 09:16 AM (SZy+Y)

9 I can only hope this will actually hit the NJ/NY area to drive down the
cost of homes and the associated taxes.

It may drive down prices, but localities will be compelled to raise marginal tax rates to compensate for the decline in tax revenue.

Posted by: Purple Avenger at May 13, 2010 09:17 AM (QioD0)

10 No, see, once all the rats have left, then the ship will be lighter and it won't sink! It's foolproof!

Posted by: Joanna at May 13, 2010 09:17 AM (7+WuG)

11 #4, Several did after the Federal initiative (spring '09), and now a number of large holders local gov'ts have moratoriums in place...
Of course, had this been under the Bush/Cheney/eviiil/Halliburton administration, well, you fill in the blanks.
Now we just get unicorn farts skittles, but only for those unwilling to pay back their loans.

Posted by: Jess at May 13, 2010 09:18 AM (xgrkw)

12 Now on to Europe to screw it up even more. Oh, by the way Karzi, that little spat that we had about 3 months ago where I called you a teabagger, that was only a joke. And David Cameron, I was only joking when I said a French Whore is smarter then you. I really do love you man and the UK, Guiness Draft, Fat Ankled Women, and the Queen. Hey David, do you want a DVD with my greatest speeches? ......All 456,789 of them?

Posted by: Brarack Obama at May 13, 2010 09:20 AM (SZy+Y)

13 "It may drive down prices, but localities will be compelled to raise marginal tax rates to compensate for the decline in tax revenue. "

Because cutting spending is just so, neanderthal*...

* it's so simple a caveman - well, you know the rest.

Posted by: Jess at May 13, 2010 09:20 AM (xgrkw)

14 Barry: All is well with the economy because I say it is and my media dutifully reports it. Anyand allproblems are all Bush's fault anyway. Now if you'll excuse me I've got a 9am tee time

Posted by: TheQuietMan at May 13, 2010 09:22 AM (1Jaio)

15 Once the localities start to realize the property tax bills on those moratorium properties aren't getting paid anymore, they'll soon change their tune.

At least if a bank forecloses and regains possession, the tax bills will be getting paid again.

Posted by: Purple Avenger at May 13, 2010 09:23 AM (QioD0)

16 The next booms are in arson and "start a new life with a new identity" books. Get in on the ground floor!

Posted by: oblig. at May 13, 2010 09:23 AM (x7Ao8)

17 Well you don't have to worry, your gov't (aka gubm't) will not let this crisis go to waste. This is a wonderful source of new government housing that will not go to waste.

Posted by: Dennis at May 13, 2010 09:24 AM (aES5F)

18 PA.

So be it.

I will take the cost of homes going back to an appropriate valuation as a fair trade.

The politicians will have to come to the people to raise these marginal tax rates.

If they're out of line the politicians can be replaced.

Posted by: McLovin at May 13, 2010 09:24 AM (RwvN1)

19 PA, you should move.

Posted by: Jean at May 13, 2010 09:24 AM (tJF9l)

20 Everything's going to be fine!
Unicorns and pixies need a place to live too, so when they start buying up empty homes we'll be set!

Posted by: EC at May 13, 2010 09:25 AM (mAhn3)

21 Does anybody still take the AP fuckheads seriously?

Posted by: Captain Hate at May 13, 2010 09:26 AM (3AE0l)

22 At least if a bank forecloses and regains possession, the tax bills will be getting paid again. -- another reason for the Bank not to foreclose, they might not have th cash to cover the taxes or have a hope for selling it someday for enough to cover the loan and taxes paid.

Posted by: Jean at May 13, 2010 09:26 AM (mtAmx)

23 PA- It's been awhile since I did any math, but I don't think 92,000 is any where near 1million. Just sayin.

Posted by: Rich at May 13, 2010 09:27 AM (Qrjpn)

24 #23
Monthly versus yearly.

Posted by: NJConservative at May 13, 2010 09:30 AM (LH6ir)

25 I can only hope this will actually hit the NJ/NY area to drive down the cost of homes and the associated taxes.
McLovin, you and I both. But NY is doing all sorts of stupid things to keep the bubble inflated.
One of my sweet, dumb lib friends sent me a link to this article onthisNY state first time home owners program, telling me how great it was. I almost choked him through the interwebs:
[Warning, NY times link]
http://tinyurl.com/2vwxkp2
No credit checks, the ability to purchase a home that could be 6X your salary, and it's all insured by bankrupt federal institutions stealing taxpayer money. Brilliant, f-ing brilliant.

Posted by: La Mauvaise New Yorkaise at May 13, 2010 09:32 AM (8uZ8A)

26 Please stop!

Posted by: The Chicken at May 13, 2010 09:35 AM (tekDi)

27 Economic indicator Newspeak at its finest.

12% of households with mortgages had missed at least one payment, but happy days are here again ?

In hard economic times, the news over-reports every indicator - that's their nature regardless of who's in power. The difference was that Bush's 2% would have been reported as "Foreclosure Rates Still at x-year high - more hard times ahead."

Posted by: societyis2blame at May 13, 2010 09:36 AM (7ZyYf)

28 One of my sweet, dumb lib friends sent me a link to this article
onthisNY state first time home owners program, telling me how great it
was. I almost choked him through the interwebs:

I wonder how your friend is going to feel when NY runs out of money this year or next because of crap like this?

Posted by: Deathknyte at May 13, 2010 09:38 AM (12blM)

29 "Monthly versus yearly."
Doh! Reading comprehension FAIL!
I stand corrected. Thank you NJCon.
*cuts self

Posted by: Rich at May 13, 2010 09:39 AM (Qrjpn)

30 La Mauvaise New Yorkaise,

Don't worry the day of reckoning will come for NYC.

When the average sale price of a home is 1 Million dollars, somethings
got to give.

Even in places like the Bronx the average is $350-400K. The BRONX!!!

Now I was born and raised there, but come on!!

Posted by: McLovin at May 13, 2010 09:40 AM (RwvN1)

31 You know... back in 2008 I kept having discussions with co-workers about the election and how the economy wasn't really as bad as had been reported (nope- it took GOVERNMENT to really screw it up) and that voting in a Democrat because you're concerned about the economy is like hiring an arsonist to get rid of your termite problem.
When BHO won, I predicted that in six months to a year, even though nothing would have really changed (at least, not positively) that suddenly the news reporting would suggest that everything was fine.
Sometimes it's a burden being right so often...

Posted by: Allen G at May 13, 2010 09:40 AM (hH7n9)

32 I'm not normally a "gold bug", but I'm getting fairly pessimistic about the future for our fiat-money system. We're spending way more than we're actually creating in terms of real wealth (goods, services, and so on). Too much fanciful value-add is being invented -- too much fiat money giving birth to other fiat money with no real-world value counterpart being involved. With no anchor to a real-world asset like gold, fiat money is just growing like Topsy.

This worked for a long time after the US went off the gold standard because the US was still riding the huge productivity and investment surge of World War II. But I think the steam may be running out -- emerging economies like the BRICs aren't going to be able to provide the same amount of motive power. (The hope is that China and India will pivot from being net-exporters to net-consumers overnight. It ain't gonna happen that fast, and it may not happen at all.)

I'm beginning to wonder if I shouldn't start hedging my bets a little bit with some gold and silver bullion. (If there's any to be had -- most dealers I've looked at are completely out, even at absurdly-high prices. And I want metal, not futures certificates or coupons.)

Posted by: Monty at May 13, 2010 09:41 AM (4Pleu)

33 16 The next booms are in arson and "start a new life with a new identity" books. Get in on the ground floor!
Posted by: oblig. at May 13, 2010 09:23 AM (x7Ao
Last July, in nearby Reno, a $30 million buck under construction apartment complex became charcoal....the hydrants didn't work either.

Posted by: torabora at May 13, 2010 09:41 AM (tekDi)

34 This article is bullshit; it doesn't contain the word "unexpectedly".

Posted by: Herr Morgenholz at May 13, 2010 09:46 AM (5aa4z)

35 Once the localities start to realize the property tax bills on those moratorium properties aren't getting paid anymore, they'll soon change their tune.
Probably. My point was that moratoriums contribute to a decrease in filings. Just adding more ammo toyour assertion that this is all BS.

Posted by: The Outlaw in the Heavenly Hall at May 13, 2010 09:48 AM (WVPUX)

36 I'm not normally a "gold bug", but I'm getting fairly pessimistic about the future for our fiat-money system. We're spending way more than we're actually creating
in terms of real wealth (goods, services, and so on). Too much fanciful
value-add is being invented -- too much fiat money giving birth to
other fiat money with no real-world value counterpart being involved

Is "we" just the United States? I hope not. Just about every central bank in the world is presently operating the printing presses at their highest rates ever. And not just last hundred years "ever", but like since the 13th century "ever".

The Fed now has a liquidity window just for Europe.

If the media cannot convince spenders to keep on spending this temple looks awfully weak.

Posted by: wtfci at May 13, 2010 09:55 AM (+zo63)

37 The next booms are in arson and "start a new life with a new identity" books. Get in on the ground floor!

Posted by: oblig. at May 13, 2010 09:23 AM (x7Ao
I see nothing wrong with a little "Jewish Lightning."

Posted by: Fish at May 13, 2010 09:56 AM (mTAG8)

38 Good news, everyone! I finally fixed the poison slime pipes!

Posted by: Ben Bernacke at May 13, 2010 09:57 AM (xlmQD)

39 @Deathknyte

NYS is already out of money, the City is not far behind.

@McLovin,

Is that 350-400k in the Bronx in a neighborhood where you won't get shot or just average price for what you are looking for? We looked in the Bronx in summer of 2006 and everything in a decent neighborhood was 500-650k, except for a couple of private communities (cooperative but you had your own structure) by the Throgs Neck Bridge, they were below 400k, but you needed the support of between 3-5 residents to buy in. And still would have needed to send my kids to private school to give them an education.

Posted by: Penfold at May 13, 2010 09:58 AM (1PeEC)

40 So put me a little knowledge, please - what's the ripple effect of all of this? Obviously it's a Bad Thingtm for the banks and some of those losing their homes, but how does it spread to affect everyone?

What can we expect in the next 9 to 18 months due to this situation?


Posted by: grognard at May 13, 2010 09:58 AM (v0kvW)

41 No, see, once all the rats have left, then the ship
will be lighter and it won't sink! It's foolproof!

Posted by: Joanna
at May 13, 2010 09:17 AM (7+WuG)
Heh.

Posted by: FUBAR at May 13, 2010 09:58 AM (1fanL)

42 Probably. My point was that moratoriums contribute to a decrease in
filings. Just adding more ammo toyour assertion that this is all BS.

Around here, the property taxes are bundled into the escrow payment portion of the mortgage, and the mortgage servicer pays the property tax bills from the escrow account. It's done this way because the trust holder has a keen interest in making sure that the county does not grab *the* controlling lien on the house. Year-on-year fluctuations in assessments and tax rates lead to fairly slight adjustments in my monthly payments, and my escrow account can run in the red until the servicer applies a catch-up.

In other words, I'm guessing that the trust holders are paying the property taxes on the delinquent mortgages because if they didn't, they could lose claim to the properties.

Posted by: MikeO at May 13, 2010 10:00 AM (lBmZl)

43 Is "we" just the United States?

Nope. It's everybody. The entire world now functions on fiat money.

This is also why I caution people not to trust the myth of the "Chinese Dragon". Their prosperity is built on a foundation of sand, and it's due for an almighty big collapse any day now. China depends absolutely on exports to drive their economy, and exports are inevitably going to shrink as the West's budget woes deepen. That means China will have fewer buyers for their cheap electronics and finished goods; but they don't have an interior consumer market that can make up the difference. Crash time.

And Japan is in even more dire straits than China is. Japan has a debt ratio that is about 200% of GDP, but their only saving grace so far has been that the money is mainly owed to their own people. However, the aging Japanese population is tapped out -- that means Japan is going to have to start borrowing abroad to roll over their debt, and they're going to find the financing terms much more onerous than they can bear. Japan is in for some seriously bad financial pain in the next ten to twenty years.

Posted by: Monty at May 13, 2010 10:02 AM (4Pleu)

44 Between now and January 2011, some $250+ billion in adjustable rate mortgages will reset. About a quarter of those are "unsecuritized," which means the lenders are servicing the debt. Another quarter of those are "Option ARM's," where borrowers make token payments and roll principal and interest payments back into the loan.

I wrote about this exactly one month ago.

Unlike the FNMA and FHMC meltdowns of 2008-09, the next round of resets are going to hurt commercial banks. It's impossible to say how bad it will be--a lot of smart economists thought the 2009 resets would be disastrous, but lower interest rates pushed the reset bubble into 2010. With specters of inflation looming, Obama appointing an inflation dove to the Fed board and no real end in sight to European debt crises, there's a potential mother of all financial meltdowns in the offing.

Look at that Credit Suisse chart. There are resets coming in 2010, but an even larger number of them in 2011. Hundreds of billions of dollars worth.

Posted by: GulfCoastTider at May 13, 2010 10:02 AM (9BMyr)

45 MikeO

Those escrow accounts don't have more than a few months worth of tax payments in them. Otherwise you would be fronting the banks even more free money than you already are. My escrow account has a buffer of less than 10% of the yearly tax bill.

Posted by: NJConservative at May 13, 2010 10:03 AM (LH6ir)

46 @42,

New York City is the same way. The lender generally pays the real property taxes, and you pay a little extra every month to keep the escrow account funded. But NYC real property taxes are not much, when considered against real property taxes in Nassau County or Suffolk County or NJ.

Posted by: Penfold at May 13, 2010 10:03 AM (1PeEC)

47 Remain calm, all is well, ALL IS WELL!!!

Posted by: Chip Diller at May 13, 2010 10:03 AM (oLULt)

48 Penfold,

There are a few areas like Pelham Parkway near the Bronx Zoo and Williamsbridge and a few other areas like Pelham Bay that are nice.

Riverdale is also very nice but very expensive.

Throggs Neck is where the hoi paloi (spelling) live.



Posted by: McLovin at May 13, 2010 10:05 AM (RwvN1)

49 I have heard some lefties saying inflation is the way out; that the way out of the debt is to make it worth less. Not quite sure where that twisted logic leads.

Posted by: Jean at May 13, 2010 10:08 AM (tJF9l)

50 We lived in an apartment right by the Pelham Bay 6 train station (literally 2 blocks from the station). Convenient for work, just take the train, but was getting seedier, the Latin Kings were starting to move in. And you had to go to Westchester to get to a decent supermarket. I agree Riverdale is really expensive, i didn't even think about it.

Posted by: Penfold at May 13, 2010 10:10 AM (1PeEC)

51 Not quite sure where that twisted logic leads.

It means we should buy stock in printing press and wheelbarrow manufacturers.

Posted by: Purple Avenger at May 13, 2010 10:10 AM (QioD0)

52 NJCon - mine had a whole year, about 7K, before MerrilLynch collapsed. Now the current holder, BoA, says it has nothing. Lots of angry letters, but so far no resolution.

Posted by: Jean at May 13, 2010 10:11 AM (OlnxK)

53 PA, you in Florida or California?

Posted by: Jean at May 13, 2010 10:12 AM (6Njk9)

54 Not quite sure where that twisted logic leads.

The Weimar Republic in 1920's Germany offers a fairly terrifying reason not to go this route, as does modern-day Zimbabwe.

Posted by: Monty at May 13, 2010 10:12 AM (4Pleu)

55 PA - part of those same conversations, dispenses with the notion of 10K Jimmy Carter US Bank notes in circulation -- "because we all use plastic now".

Posted by: Jean at May 13, 2010 10:14 AM (6Njk9)

56 Every time a house is foreclosed, the Democrats get 200 extra votes.

And the Baby Jesus cries.

Posted by: snapdrago, defective troll at May 13, 2010 10:15 AM (Mmw0q)

57 NJConservative,

1. I understand what you're saying, and the situation is about the same for me here in Virginia

2. I acknowledge that I don't know jack about your situation because I have a vague notion that New Jersey has crazy high property taxation

My point was not so much about whether the escrow account covers property taxes as it was that I think the bank does it this way to keep tabs on preventing a tax seizure that could cause them to lose any claim the mortgaged property. If this is why they do it, then I would expect that they are paying the property taxes on delinquent mortgages.

Posted by: MikeO at May 13, 2010 10:16 AM (lBmZl)

58 @57 self

Crap. I forgot to state my bottom line:

If the banks are paying property taxes to preserve their claims on the properties on which they hold mortgages, then the property tax filings will not be down, and the localities have no impetus to move foreclosures along.

Posted by: MikeO at May 13, 2010 10:22 AM (lBmZl)

59 PA, you in Florida or California?

South FL, Palm Beach area.

Posted by: Purple Avenger at May 13, 2010 10:24 AM (QioD0)

60 The localities will be getting pressure from the local voters because of the empty properties and the banks because those tax payments are cash. Cash they might not have. Eventually, something is going to give. I have heard of some counties adding on significant uninhabited property riders to the tax bills.

Posted by: Jean at May 13, 2010 10:27 AM (JaO+v)

61 PA, just guessing.

Posted by: Jean at May 13, 2010 10:28 AM (JaO+v)

62 If the banks are paying property taxes to preserve their claims on the
properties on which they hold mortgages, then the property tax filings
will not be down, and the localities have no impetus to move
foreclosures along.

At some point, if the inventory doesn't move even at blow out prices, and the tax bills keep coming, the banks will simply default on the taxes or bulldoze the joints to reduce tax exposure.

The bulldozing thing has already happened in CA with developers to reduce tax exposure, and cities in the north have horrendous lists of tax foreclosed properties they're trying to get rid of. For some reason Albany county in NY keeps sending me their tax lien sale lists.

Posted by: Purple Avenger at May 13, 2010 10:28 AM (QioD0)

63 They meant to write "shows signs of subsidizing" I think.

Posted by: scooter (still not libby) at May 13, 2010 10:29 AM (aamim)

64 What can we expect in the next 9 to 18 months due to this situation?

Prices should continue to fall. However, the new progressive "fix" is to use stimulus money to just pay a holder's mortgage.

We're really in "we're so fucked land". All the rules are changing in order to protect the balance sheets of 8 US banks.

The good news is the Euro is going to tank over the same time period. The US Dollar and Japanese Yen will only get stronger. It's going to be a great time to not pay your mortgage and instead take that vacation to Europe. I heard Greek riots in June are awfully scenic. It's like a really shitty version of "Rent" only real.

Posted by: wtfci at May 13, 2010 10:30 AM (+zo63)

65 Around here, bulldozing the house would increase the value of the property.

Posted by: Jean at May 13, 2010 10:32 AM (OlnxK)

66 Next 18 months - I expect 1) interest rates to rise modestly, to try an give some life to the bond markets, 2) inflation to start creeping up, 3) the Treasury to introduce a new bond or release the cap on I bonds, 4) stock market to swing crazily, 5) Bank consolidation 8 down to 4, 6) Strong ammunition sales to continue

Posted by: Jean at May 13, 2010 10:35 AM (6Njk9)

67 You're welcome.

Posted by: barack hussein obama at May 13, 2010 10:36 AM (4WbTI)

68 I don't remember which cable news station it was, but at the gym this morning the little titles screen did say something like "foreclosures down amid backlog." They have Bloomberg on so it might have been that. I can't see even Fox being that truthful (or smart) about it.

Posted by: tachyonshuggy at May 13, 2010 10:38 AM (BUlti)

69 NPR last week: Good news!! We are bouncing back - new jobless claims areUP.
NPR this week: Good news!! We are bouncing back - new jobless claims areDOWN.
That's the great thing about having a Democrat in the White House and a lapdog media that lives only tonuzzle up next to his privates-
WE JUST CAN'T LOSE!!! YAY!!

Posted by: sherlock at May 13, 2010 10:42 AM (ZrS0c)

70 I have heard some lefties saying inflation is the way out; that the way
out of the debt is to make it worth less. Not quite sure where that
twisted logic leads.

It's called "monetizing the debt," and it's done by increasing the money supply so rapidly and massively that anything denominated in the currency being inflated becomes worthless. See Weimar Republic, circa 1920's and Argentina ca late 1980's.

It would be economic armageddon.


Posted by: GulfCoastTider at May 13, 2010 10:42 AM (9BMyr)

71 Eventually, something is going to give. I have heard of some counties
adding on significant uninhabited property riders to the tax bills.

Yes. I agree that something has to give. I also think that there are a host of other problems spanning the gamut from the moral hazard inequity of allowing people to stay in their homes without making payments to the decline of property values attributable to the deterioration of neglected (unoccupied or not) homes in an otherwise good neighborhood.

I was narrowly saying that I don't think there has been a decline in property tax filings due to delinquent mortgages because the whole country is not Detroit where trust holders calculate tax liabilities to be more than properties' worth. . . yet.

The market needs to find its bottom, but it will not so long as we collectively hold the misguided notion that home ownership is more a right than a privilege with attendant responsibilities.

The banks keep looking to the federal government to see what kind of taxpayer-funded gimmick they're going to pull out of their ass next. The banks are going to keep obstructing movement toward the bottom until they realize that the silver bullets are all gone.

Posted by: MikeO at May 13, 2010 10:43 AM (lBmZl)

72 yes that is great news but what is important to know is how many were connected to ACORN

Posted by: Georgie at May 13, 2010 10:43 AM (I+7Zv)

73 @66 Jean

6) Strong ammunition sales to continue

Heh. That's why I'm looking for a new house: I need more space for my precious metals (copper, brass, and lead).

Posted by: MikeO at May 13, 2010 10:47 AM (lBmZl)

74 MikeO - as long as someone has a plan to hold the bridges, Virginia should be ok.

Posted by: Jean at May 13, 2010 10:52 AM (mtAmx)

75 @64 that's the whole thing that pisses me off the most: All of this enslavement of us taxpayers to the federal government's debt is being done to save a handful of well-connected banks profits! That's it. Fuckers need to burn.

If bad mortgages were the problem, we've borrowed more than enough to pay off every single one. It ain't the bad, bad, stupid poor folk, ne'er do wells who won't pay their mortgage that's the problem--this is 100% bad paper the banks created to scam more money and now that they might get burned on it have bribed our government to join the scheme of palming it off on--you guessed it--the taxpayers!

Posted by: jimmuy at May 13, 2010 10:54 AM (xJzIj)

76 @62 PA

At some point, if the inventory doesn't move even at blow out prices,
and the tax bills keep coming, the banks will simply default on the
taxes or bulldoze the joints to reduce tax exposure.

Right. But this depends on what the crossover point is between tax liability and the property's value.

Once localities take ownership, it's a recipe for some awful redistributionist mischief of the kind that made Tony Rezko who he is. Some stimulus funds + HUD Section 8 = a comfortable life as a slumlord developer so long as you can avoid the big house.

Posted by: MikeO at May 13, 2010 10:55 AM (lBmZl)

77 #36 "I'm getting fairly pessimistic about the future for our fiat-money system. We're spending way more than we're actually creating in terms of real wealth (goods, services, and so on)."

I recently came across something called Modern Monetary Theory, which argues that a fiat currency system operates under fundamentally different rules from a gold-based system. There's a brief, nontechnical overview here:

tiny.cc/cswej

If this theory is right, then maybe we aren't in as much trouble as we think. Not being an economist, I don't know if MMT is true or false, but possibly these theorists have a point when they say that kitchen-table budgeting has no relevance to the operations of a sovereign currency issuer.

Posted by: sauropod at May 13, 2010 11:00 AM (GPm6P)

78 It's like a really shitty version of "Rent" only real.
with an ouzo chaser

Posted by: kallisto at May 13, 2010 11:01 AM (+FkcS)

79 PA...
"...Two joints right across the street are at least 9 months behind and have
stopped paying..."

and

Grognard @ 40...
"...So put me a little knowledge, please - what's the ripple effect of all
of this?..."

PA,
Here's the thing....Your neighbors who behind on their mortgages are still spending the money they would have spent for housing. When the banks finally get around to foreclosing on their homes, they're going to have to rent.

And their landlords aren't going to be nearly so forgiving about late payments, so they're going to have to keep up or be evicted. And that means that they won't be able to continue to spend money on toys and shiny things. The "Double Dip" approaches.

Posted by: azlibertarian at May 13, 2010 11:05 AM (zw1gy)

80 See Weimar Republic, circa 1920's and Argentina ca late 1980's.

No need to look that far. See Jimmeh Catah, 1980s.

Posted by: Vic at May 13, 2010 11:07 AM (6taRI)

81 If this theory is right

It's not, for the simple reason that even governments aren't immune from market-pressure. Yes, the government owns the presses and can print money -- but in the end the money has to be worth something. And that "worth" must be based on some kind of objective standard: if not Gold, then some notional international reserve standard. Until recently, this standard was Gold...but there's not enough Gold in the entire world to support the size of the world economy (not even close) even now, much less to allow for growth in the future.

I've heard people defend fiat money systems by saying that, in essence, fiat money's "worth" will always be established by a combination of market pressure and regulation. I don't believe it because as the past couple of years have shown us, governmental money-printers are more bound by political concerns than economic ones. Fiat money's "worth" is thus being calculated in political terms rather than economic ones, and this is a sure road to ruin.

What these guys forget (or do their best to ignore) is that fiat money is just paper. It's basically a certain kind of very-short-term, zero-interest government bond. It's worth exactly what people think it's worth (what the "full faith and credit of the United States" is worth, in other words). If that trust is broken -- as it is in infaltionary regimes -- then the currency itself is broken.

Posted by: Monty at May 13, 2010 11:09 AM (4Pleu)

82 I should add that the US dollar has become the default "world reserve standard", but since the dollar itself is a fiat currency, this standard fluctuates right along with the dollar. And it's a terribly tenuous thing, because it only pertains so long as the world trusts the US government to keep the dollar on sound footing...and that trust has been very weakened over the past decade.

Posted by: Monty at May 13, 2010 11:15 AM (4Pleu)

83 from TheHill.com
"New Jersey, which has the highest unemployment in the region and highest taxes in the country, lost 121,000 jobs in the private sector in 2009 while adding 11,300 new education jobs. During the last eight years, K-12 enrollment rose just 3 percent while education jobs increased more than 16 percent. According to the Newark Star-Ledger, during the recession that has cost many residents their homes and jobs and scaled back hours and pay for the employed, teachers’ salaries rose by nearly 5 percent, double the rate of inflation."
May have something to do with NJ's extortionateproperty taxes.

Posted by: kallisto at May 13, 2010 11:17 AM (+FkcS)

84 Monty @ 32: You might want to add another metal: steel jacketed lead.
I'm adding canned goods, ammo, toilet paper to my portfolio. You can't eat or wipe your ass with gold silver.

Posted by: butch at May 13, 2010 11:21 AM (8X9tr)

85 Monty @ 32: You might want to add another metal: steel jacketed lead.

Oh, I'm way ahead of you there - I started buying ammo just as soon as it was clear that Bammer was going to be our new Emperor. I've got a decent stockpile now of 5.56 NATO for my AR and .40S&W for my Springfield XD, and several bricks of .22LR for my plinking guns.

Posted by: Monty at May 13, 2010 11:26 AM (4Pleu)

86 Yesterday, Peter Schiff was on Fast Money. Those MFM brats were trying to spin the great recovery. Schiff who is long gold said "what recovery?" People don't have any money, they are broke. And taxes are going to shoot straight up along with inflation. Basically we are fucked. I love Schiff.

It was the same thing Schiff faced when telling everyone there would be a huge banking collapse in 2006-2007. The three stages of truth. First it is ridiculed, then it is violently opposed, then it becomes self evident.

Posted by: Lunatic, What Comes From the Fringe at May 13, 2010 11:28 AM (uFdnM)

87 It does matter if the money is in circulation. A lot of what we're printing up is reserves, which don't circulate ( they do free up other money that does.) If you were to look at how much money we've created, at a glance you'd figure it had to be nearly worthless.

Posted by: actual moron at May 13, 2010 11:28 AM (rplL3)

88 Begone, Socky!

Posted by: spongeworthy at May 13, 2010 11:30 AM (rplL3)

89 Only 3% of the all of the money incurred as debt actually exists as dollars. The other 97% does not exist. The printing press BS you hear is BS. If everyone called in their debt right now, you would receive 3 cents on the dollar, fiat currency. No shit.

Posted by: Lunatic, What Comes From the Fringe at May 13, 2010 11:31 AM (uFdnM)

90 Lessee, I got .38SPL, .45ACP, .30-06, WIN .308/NATO 7.62, 12G double-aught. My closet looks like an armory.

Posted by: butch at May 13, 2010 11:31 AM (8X9tr)

91 The most misunderstood concept in this country is how money is created. Money is created in theory when you take out a loan. Debt. The money isn't actually created. It doesn't exist. When you take a loan for 100k, the bankers book this as an asset. They then are allowed to leverage that at 9-1. So they loan 900k based on the theory that you will pay the 100k you owe. That is fractional banking, muy simplified. When everyone calls for their money at once, the system totally melts down because nobody actually has the money to pay off the debt. Thus your banking collapse. Thus banks are loaning you at interest, money they don't even have in the first place. It is the greatest fraud ever perpetuated. And it has been going on for centuries.

If we ever Audit the Fed, we will see fractional banking gone fucking berserk. There is no way the Fed has the money to be buying trillions worth of debt. It is absolute bullshit. It is the reason that bill will never pass. If the Fed were ever audited, the fucking air will collectively leave everyone's lungs.

Posted by: Lunatic, What Comes From the Fringe at May 13, 2010 11:45 AM (uFdnM)

92 Isn't Obama great?

Posted by: crapdragon at May 13, 2010 11:50 AM (f7A+e)

93 I am monitering this site. If this continues I will sent Janet Napotitano to sit on all your faces... I have spoken... Thank You

Posted by: Brarack Obama at May 13, 2010 11:51 AM (SZy+Y)

94 See what I mean? I mean who wouldn't want that?

Posted by: crapdragon at May 13, 2010 11:52 AM (f7A+e)

95 Thanks, Monty (and others), for your response.

I think Modern Monetary Theorists would say that the objective standard that underlies a fiat currency system is the total value of goods and services in the economy. They believe there should be enough money in circulation to theoretically purchase all the goods and services that are being offered at any given time. If the money supply exceeds this amount, inflation results (too much money chasing too few goods); if it falls short of this amount, unemployment results (not enough money to fund full employment).

MMT is counterintuitive because we tend to think of the government as analogous to a household, and if a household starts maxing out its credit cards, it is courting ruin. But MMT argues that the government is a currency issuer, while a household is a currency user, and the rules are fundamentally different for each.

MMT distinguishes sharply between a sovereign currency issuer (like the US federal government) and a government that cannot issue its own currency (like state and local governments, or the government of Greece now that it is part of the EU).

I don't know if MMT is correct or not. I suppose we are engaged in a real-world test of the theory right now ....

Posted by: sauropod at May 13, 2010 11:52 AM (GPm6P)

96 Eh, everyone knows money comes from Obama's stash. Silly wingers.

Posted by: crapdragon at May 13, 2010 11:53 AM (f7A+e)

97 My fucking brain hurts. The money does not exist.

Posted by: Lunatic, What Comes From the Fringe at May 13, 2010 11:54 AM (uFdnM)

98 I think Modern Monetary Theorists would say that the objective standard that underlies a fiat currency system is the total value of goods and services in the economy.

That's all well and good except for the concept of liquidity. I may have a house "worth" $200K, but if I plan to live in it and not sell it, that "worth" is entirely notional (and changes as time goes by -- for example, if I burn it down, it goes from $200K one day to nearly zero on the next). And my house is only "worth" what I think it is because the appraisers agree that it is -- subject to market conditions, the economy, and so forth. In other words: that $200K is purely speculative in most ways that count. That "value" could be off by as much as 50-100%.

MMT advocates are smoking crackrock.

Posted by: Monty at May 13, 2010 12:11 PM (4Pleu)

99 "That's all well and good except for the concept of liquidity."

If I understand MMT correctly, the theory would say that there is a way of determining whether the money supply is excessive or insufficient. If there is inflation, it's excessive. If there is unemployment (above some unavoidable minimum level), it's insufficient. So the supply of money would be regulated according to economic conditions as they unfold. In the event of a sudden reduction of the supply of goods (say, an epidemic of arson in which everyone burned down their house), the money supply would have to be contracted to prevent inflation. The idea, as I understand it, is to be flexible. MMT's main criticism of mainstream monetary theory, whether Keynesian or monetarist, is that such approaches are not flexible enough.

Posted by: sauropod at May 13, 2010 12:29 PM (GPm6P)

100 The MFM is still trying to project that "everything is coming up roses". For years they bashed the Bush economy, now their trying to prop up Obama's Potemkin economy.

Posted by: GarandFan at May 13, 2010 12:49 PM (6mwMs)

101 Sauropod, I promise not to get into a discussion of the relative merits of the gold
standard, Keynesian or Monetarist systems on a blog's comments thingy.


But, regardless of whether you are on a gold standard or a fiat currency system, money is just the medium of exchange. It serves as a means of measuring the value of goods and services vis-a-vis one another.

The simplest way to grasp monetarist theory is to understand that, on average, people wish to hold a certain amount of money (M) versus their comprehension of the general price level (P). You can then write that relationship as M/P and express it as "real money balances." You should also understand that the M/P relationship remains fairly constant over the long run.

Any change in the value of the numerator is met with a proportional change in the denominator, and vice versa. In a dynamic and growing economy, increases in production and output change the value of P. The goal therefore, of an empirical, objective, nonpolitical monetary policy is to maintain the growth of M such that it neither constricts the output growth nor exceeds it such that it causes inflation.

Monetarism is possible under a gold standard but it would require such a retooling of the money, banking and financial systems that the political fallout would be disastrous.

Posted by: GulfCoastTider at May 13, 2010 01:14 PM (9BMyr)

102 The real action is in the sand states, most of all Nevada, which leads the pack by several lengths. Maybe Sweet Sue Lowden isn't far off with her CDS idea -- fill up all those vacated houses with livestock.

(By "CDS" of course I mean "Chicken Doctor Swaps". By the way, I'd sure rather watch her on Fox than be forced to watch as Harry Reid's sphincter continues to take over his face.)

Posted by: Shooter at May 13, 2010 01:17 PM (zfRju)

103 I meant to add a quote from my hero, Milton Friedman: "Inflation is always and everywhere a monetary phenomenon."

And a quote of my own: "The money supply is like a river supplying life to the economy. Everything is fine until a drought dries it up or a flood drowns it."

Posted by: GulfCoastTider at May 13, 2010 01:19 PM (9BMyr)

104 "Here's the thing....Your neighbors who behind on
their mortgages are still spending the money they would have spent for
housing. When the banks finally get around to foreclosing on their
homes, they're going to have to rent.

And their landlords aren't
going to be nearly so forgiving about late payments, so they're going to
have to keep up or be evicted. And that means that they won't be able
to continue to spend money on toys and shiny things. The "Double Dip"
approaches.


Posted by: azlibertarian at May 13, 2010 11:05 AM (zw1gy)"That's an intelligent insight. A lot of people are kicking the can down the road and hoping something somehow magically solves our problems. I don't think we'll be survivalists living off the land in post apocalyptic America or anything, but people need to be prepared for some serious problems.

Posted by: Lex Luthor, Ruler of Australia at May 13, 2010 01:24 PM (dUOK+)

105 You must be busy as hell stealing copper and aluminum siding!

Posted by: hutch1200 at May 13, 2010 02:05 PM (xfiv9)

106 MMT advocates are smoking crackrock.



Posted by: Monty

At this point, those that can offer a reasonable explanation of a fiat-driven system are the contrarians now.


Posted by: Garbonzo the Garrulous at May 13, 2010 03:21 PM (zgd5N)

107 31, I have a sister who basically wont talk to me for the same "predictions" I made.
To her, I am a stoooopid conservative.

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