Your spurious argument completely misses the critical importance of financing and its ability to push off payment until tomorrow.

Your argument might hold water in a single-transaction system where everything is paid for out of cash, and you could instantly consume the total of purchases and reap the benefits of equal parts of utility for each and every unit without diminishing returns. And, likewise, could break down the sub-units of a house into fractional utility units (since one taco reflects one bijillionth of a house, I could get exactly one bijillionth of the utility of a house by buying one taco).

None of those conditions exist, so your academic argument doesn’t go far in the real world.

House prices are what can be financed out of regular income given the available financing. Nothing more. Trying to assign the value based on tacos (or anything else for that matter) to try to remove the inflationary bias of a fiat monetary system is a rat hole that noone cares to chase you down into.

We agree: more money is inflationary. Houses are expensive when priced in anything. It is because of irrational exuberance.

The only way that the irrational exuberance will die away is when it is killed off by fear.

I, for one, welcome that day.

When they system gets really non-productive then you have some kind of reboot. AKA depression and reorganization.

We have built a historically high standard of life. Just hopefull we can sustain it and spread it to the rest of the planet.

There are some limits on the power of the banks and the FED.

1) Treasury can physically print money and side step that aspect of the system

2) Courts can decide how to enforce debt contracts

3) Government can revoke bank charters or disolve the Fed.
— dangerous moves

4) At certain points money has no meaning. If you are starving.. exc so physical wealth is more certain.

5) Treasury can change accounting standards and force Fed to restrict money supply

So, the government is working within the system to spur certain types of investment and wealth distribution. Not entirely a bad thing.

Can we find out who owns the FED?

Also funny to see how easily the government could pay off or cancel its debt system and move to a non-inflationary system very quickly. Huge impacts to that but still possible.

They were promised high returns that were basically guaranteed during the boom years. Many people incorrectly assume that Fannie and Freddie’s products are government guaranteed. The reality is that they can lose value just like any other corporate bond.

THEY ARE WRONG!

The truth is that these member banks issue what is already there: the value of the home that the money represents. They are not creating money because money is only a representation of value. The value of the home will exist with or without the money.

The house could be traded for an equivalent value in tacos (another item of value, instead of a representation of value)if money did not exist.

Inflation happens when people default on paying thier loans, not when more money is “created”! The loss of the value in what the money represents causes the inflation.

I totally agree with you. Instead of being able to take advantage of the low interest rates to secure better loans, people refinanced to pull out cash to spend on luxury stuff that I can’t afford. They admire themselves for being able to have soooo many nice things. I never have and never will feel sorry for these people when they can’t pay the new payments. They are still too stupid to realize that their houses will not increase in values forever. In the Riverside Press Business news today, an article states that people in the IE are still spending and the economy is still booming. They have not stop the spending spree. They WILL NOT stop until they loose the house. Well, the folks that sell BMWs and Lexus had a good ride… and still are making lots of sales… Let us see when this is all gonna stop.

The US Mint actually prints money or coin.

But, physical money is just a small portion of money.

Most money is created by Federal Reserve member banks. The Federal Reserve is authorized by Congress to safeguard the currency… hence the periodic testimonies in front of Congress by Ben Bernanke.

Here’s a good description of the creation of money from debt:

http://www.notjustnotes.ws/howbanksrobyou.htm

Fair warning; the videos at the end have interesting suggestions that I don’t necessarily agree with.

Chuck Ponzi

Does the FED print money or is that the exclusive domain of the treasury?

I thought only the treasury can actually print money or issue federal government bonds?

Did I completely lose touch with the situation?

I realize the FED are like a big bank clearing house for loans. A banks bank. However, I do see the people saying the FED will print money stated a lot or lower rates. My thought was the treasury recently slowed the printing presses. How does that impact the FED and overall money supply?

I wonder what their reserves are like?

Yeah, looks like this is going to be a doozy. The pension funds will be suing a lot of lenders in short order.

Its weird how all this was so preventable. I remember as Easy Al was slashing the rates had a discussion with a coworker. He was a very sucess investor and he remarked that “the rate changes didn’t seem to be having much of an effect.”

I remember cautioning that there was a big time delay before we felt the effect. When we realized it the momentum was going to be horrific.

I also had hopes that a substantial portion of the population would use that time to refinance into better loans and stabalize their cash flow situations.

Didn’t happen. The assets went through the roof and they all spent like crazy. Over time I have lost my sympathy for them.

We could yet see the “credit event” that I have been predicting could happen.

Think the house sales are slow then? It’ll be like a frieght train running into a mountainside.

Chuck Ponzi

That all might turn into shock in the real estate market.

I’d venture I’m reading way to much in this but seems like a pretty big sell off going on.

Big enough drops and losses will ripple into that NYC market and pound the east coast.

I’m kind of waiting/watching for the shock that puts the whole system into a tail spin. Not profiting on this just observing and trying to prepare.

She wished me well and drove off.

Did she really think I would actually do business with someone who interrupts my precious few minutes of daily family time?

He changed it the same day I post this to it.

Chuck

I bet he changed his original predictions. I’ll check it when I get a moment.

Chuck, what makes you think Gary has any credibility left to burn? To the extent the MSM continues to provide him a forum, it’s only because they either don’t check his accuracy at all, or actively don’t care because they’re acting as advocates for an outcome rather than disinterested reporters of fact. (There are a lot more advertising dollars to be had in a booming market than a tanking one, and they know where their bread is buttered…)

What is the public liability on this bizzare delaying action on the housing burst. Seems like another bailout effort.

I think Fannie is private but such a large interest that as they go under the gov will get dragged into the mess.

Congresional Democrats are apparently gushing over their “help”.

I feel my paycheck being sucked up as we speak.

That’s right. It WAS the Meat Puppets.

I totally blanked that since Kurt voice is the best known.

Chuck

Also, “Lake of Fire” was written by the Meat Puppets. Nirvana covered it (actually, performed it with the Meat Puppets) in the now-famous MTV Unplugged version.