Novasold, it's all in the "ifs". You report that your friend couldn't qualify to get out of CC debt trouble. You suggest that if those with high credit scores start refinancing things could start to reinflate. Here's the problem, my friend: the bubble was made from loaning to those without high credit scores . . . like your friend, who is the one with the CC debt trouble, and who the one interested in refinancing to get out of trouble. The tip of the pyramid with high credit scores aren't going to prop up Housing Bubble 2.0.

As for "the world just needs the American consumer to start spending money they never had again," I'm really hoping you're being sarcastic. This is the logic that gives us stimulus packages where the government sends out checks so people can get their nails done and buy Caddyshack on DVD. Authentic spending increases would result from increased wages which would result from increased productivity and exports.

Chris Martenson is saying we're beyond ZIRP to NIRP. Fed lending at 0% and then allowing member banks to deposit the borrowings with the Fed where they can earn 0.25%. Which makes for an effective lending policy at negative interest rates.

http://www.chrismartenson.com/blog/fed-c....

Circle, "I'll just move it to a safe deposit box in their own farking vault."

If you read the fine print on your safety box agreement with the bank you will probably find it is "illegal" to keep 'cash' in it. Note: the sale of home safes is way, way up.

i wonder if the bond market will start to sell off before the bottom in equities is reached

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The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth

And just what the hell is Bernanke smoking anyway? "Sustainable growth"?! There is no such thing. ALL growth must come to a stop, especially our exponential economic growth, lest it consume everything in existence...

Yet, he wants everyone to borrow more against FUTURE production in a case of diminishing real returns... I vote we impeach the lot of them.

There's a very real reason for this correction that's coming, and putting it off isn't going to help.

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Novasold, it's all in the "ifs". You report that your friend couldn't qualify to get out of CC debt trouble. You suggest that if those with high credit scores start refinancing things could start to reinflate. Here's the problem, my friend: the bubble was made from loaning to those without high credit scores . . . like your friend. Who is the one with the CC debt trouble. The one who is interested in refinancing to get out of trouble. The tip of the pyramid with high credit scores aren't going to prop up Housing Bubble 2.0.

Windu: they have a high credit score, even with the debt, they've always paid on time. Not without machinations, mind you, but they've never missed a payment on anything. The reason they couldn't yank more money out of the house is b/c of the DTI and the drying up of HELOCS. They are at the moment where things could go really badly. BUT, if they can refinance and yank more money out of the house they can solve the current issue anyway.

The reason I expect lending standards to decay again is b/c that would be real oil on the fire and reinflate the bubble.

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As for "the world just needs the American consumer to start spending money they never had again,"

No Windu it's about having another shot at not being the bagholder. If you are my friend and many others like her, and you can just get that money to get yourself out of debt and b/c of the lending rate which is fixed and low, your mortgage payment actually goes down in the transaction then you have a shot. Then your income is your income to the extent you have a job. Yes, you have to restrain yourself to not blow it again, but after all the American consumer has been through seeing properties decline in value and their 401ks blow up what do YOU think they will do? Yes many will go back to their old ways but consider the impact of loads of people refinancing and wiping out their CC debt? For a time it will work.

I'm as disgusted as you but I'm not naive enough not to read the tea leaves. IF people can do just that simple transaction on a large enough scale, and live within their means, it will mean a whole lot to the credit markets and encourage reinvestment into the housing sector as an investment.

I personally am only in a position to buy for myself. I don't have that much cash to buy up properties but if a low enough mortgage rate came along (and I have very good credit and no debt) I would jump in not with the idea of making money off of that but to have a house of my own. I know it's not mine until I pay it off but you don't start down that road until enter into a contract to buy.

I'm not saying it won't all fall apart as has been outlined here, but it may be delayed for a while. I think it may be longer than six months but that's just my non-technical analysis of things.

FWIW.

Any idea when they update that chart you're using? We're almost done with Q4 and that graph still only goes up to Q2.

Novasold, your theory is violently contradicted by this week's report that $2 Trillion in home equity has been destroyed, and by this week's report that the median home price in California is below $300,000 after hitting $500,000+ two years ago (-40%).

If you have evidence that despite those facts, there are enough people having sufficient equity to be able to cash-out refi and reinflate the bubble, I'd love to see it.

Also, I think you greatly overestimate the extent to which Americans have seen the light regarding the use of credit and become Dave Ramsey listeners. No pain has been felt yet. Today's Americans know nothing but consumption.

My inlaws are a perfect example -- he's retired, she got laid off in May, and still they spend on stupid ****. Monogrammed bookbags for my kids, who don't even use bookbags -- they're in preschool. New surround sound speakers and amp. They mail us special pots and pans and **** to keep potato chip bags closed. They really are "consumers," fitting the terminology that the government uses to refer to people that used to be called "citizens." One year of pain has not changed American irresponsibility and the culture of consumption.

Please repeat the following to as many people as possible: "I don't see it working. Do you see it working?"

I think it's a race as to whether bond dislocation occurs before some state runs out of unemployment insurance money and the riots start.

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That's likely to be a short list.

Germany seems to be closest. I've been working my MPs to try to have Canada in that camp (we've done a really good job until about a month ago), but we're too ****ing joined at the ****ing hip. My national economic model for Canada? Be a place that sensible and conservative American money can flee to.

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What happens when people say "**** that, I'll keep it in the mattress!"?

You can't prevent that. But what does that do to bank Tier Capital?

Actually I'm getting very interested in peer to peer lending....**** the banks, they're like the movie music and newspaper industry...dead dead dead. Let the government own it all, and then go move to Grenada or something.

Grenada is warmer... but yea peer2peer is banking's future for leveraged small businesses anyway.

RE: peer2peer lending.

There was an internet site that did just that...

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One year of pain has not changed American irresponsibility and the culture of consumption.

Windu: I like Dave Ramsey also !

But that's my point. If BB can find a way to get consumption going by reinflating the housing bubble, some will go Dave Ramsey, if they get another chance, but all will consume to some extent.

Having said that, an esteemed blog-owner and I had a conversation about this tonight and I am now convinced that this CAN'T be done to the point that it carries forth the bubble based on consumption alone. But I'll leave it to him to explain that.

In the meantime I resume my search for a 2 bed cabin in northern N.H. with a well and woodstove.

I've already got supplies like food, guns and bullets!!!!

Nova

Not only America that people are keeping money under the mattress. The person I work with use to work at the Australian reserve bank maintaining the printing presses. He was talking to one of his ex work mates and the printing presses are working flat out. They have never been busier printing the stuff.

in econ 101 we learn there are savers and borrowers. they work together to better themselves and in so doing, better each other. selling everything and hiding the money under the mattress screws the debtors because the system of lending is broken...there is no money to be lent out. so Ben goes out and tells the banks to lend. they say, "with what money?" he gives them money. then the banks realize the credit risk doesn't justify the loan. still no lending. so what does ben propose? **** the savers until they are willing to put the money in the banks or go out and buy something with the cash. either one is good enough for him. what he is doing is systematically ****ING THE SAVERS WHO WE DESPERATELY NEED TO PAY OFF OUR NATIONAL DEBT.
When he has his way, we will all be willing to buy two new sets of tires because they hold value better than a savings acct and we are afraid to find out what they'll cost in two years. the bond markets will have already fallen apart, and as such, the stock market will finally have figured out there is nowhere to hide. This is going to be an extremely painful process to work through. the best thing I can do is make money and play good defense...because the inflation and the tax man are coming.

No Berkley.

1873 is coming and its not inflation.

Ben has blown the last bubble and his bluff WILL be called.

You're on the wrong side of this.

The Vapo(u)rs:

I caught their show in WDC at The Bayou on Water Street.
Place held 350, great, professional sound.
The Yachts opened up.

Glad I got to see them at the peak of their "pop stardom", probably work as mechanic's and x-ray technicians now.

Notice that the sound for the video is from a vinyl single or LP source? I don't recall if the original RockAmerica release sounded like that, but in 1980 the video releases to nightclubs were pre-Dolby and pre-noise reduction and stereo.

IOW, it sounded TERRIBLE. There was a distinct date cut-off where prior to October 1983, we wouldn't play the tune because it had so much hiss and no bass and bad sound. Needless to say, 1980 sounded like absolute crap on video (BETA!).

Enough of my DJ flashback.

On with ZIRP-Land...

KD wrote..

Ah, Nirvan, now you're getting it.
What happens when people say "**** that, I'll keep it in the mattress!"?
You can't prevent that. But what does that do to bank Tier Capital?

Something like this:

Uh, yeah.

Well that was awful.

I'm not out there buying gold, land, or tires. I'm saying he is trying to force people to let go of their money. by devaluaing the currency people will stop hoarding it. japan tried this several times (with the result of safe deposit boxes filled with high denomination bills wrapped in rubber bands). we need to pay off our debts one way or the other. I can only do my part. from an investment perspective I truly don't know what to do. I refuse to buy treasuries, don't like money market accts at .something%, and have that sinking feeling every time I buy a stock. been selling calls and may get called out of a few positions. than what? haven't decided.

Berkley, wait for the Ticker tomorrow.

You'll understand. I hope.