AEI says to inflate away housing problem (WSJ)

[pescamaaan]

In today's Opinion section:

http://online.wsj.com/article/SB1208...googlenews_wsj



Start the printing presses!

[Pascal]

Re: AEI says to inflate away housing problem (WSJ)

WSJ flying monkey alert.

Amazing how guys like Makin blithely refer to the general "risks" of money printing/inflation without ever having to spell out exactly what it is --stealing from savers, retirees and future generations. Instead it's sold as almost costless risk-taking that can be easily reversed.

[FRED]

Re: AEI says to inflate away housing problem (WSJ)

WSJ flying monkey alert.

Amazing how guys like Makin blithely refer to the general "risks" of money printing/inflation without ever having to spell out exactly what it is --stealing from savers, retirees and future generations. Instead it's sold as almost costless risk-taking that can be easily reversed.

Of course they're going to inflate us out of it!

Inflation is Dead! Long Live Inflation!

The Five Year, 100% Inflation Scenario

by Eric Janszen (from AlwaysOn Network, December 29, 2005)

In this model both nominal income and home value double. In reality, since so much inflation has already happened in real estate and high interest rates will increase the real cost of borrowing, home prices are likely to rise more slowly, flatten out, or even decline.

We're likely to experience a major inflation in the U.S. as an outcome of the bond, housing, and dollar bubbles that came about as a result of past monetary and fiscal policy errors. In fact, a political decision process that favors inflation, as evidenced by the housing bubble, started in the mid-1990s. The U.S. may muddle through an adjustment to less reliance on foreign debt, and households may regress to the mean in terms of savings and debt, as John Mauldin suggests. That is my hope. But highly leveraged nations and households are prone to crises, and with little savings and much debt, the opportunity to muddle through a crisis is limited. more...

[Ed]

Re: AEI says to inflate away housing problem (WSJ)

Subject: "... the honest first step out ..."
To: John H. Makin

Dr. Makin,

Just read your WSJ piece (forthrightness wonderful)
The Inflation Solution to the Housing Mess
at
http://online.wsj.com/article/SB1208...googlenews_wsj

Very drastic to say the least, especially coming after the 5.5 months ago
... Makin says that a recession “is the most desirable outcome” for deflating the U.S. housing bubble.
at
http://blogs.wsj.com/economics/2007/...ousing-bubble/

To promote intellectual honesty, I respectfully ask this question (and, presuming ‘Yes’ answer, I ask action on the ‘if and when’):

In your opinion,
will asset-market extreme mispricing be well-deterred,
if and when
real inflation-corrected asset-market price histories
are well-apparent to the people?

Exampling such histories, see first and last charts here:
“Real Dow & Real Homes & Personal Saving & Debt Burden” at
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html

I sure think that
‘fooling the people’, by keeping real price histories out-of-sight, got us here, and
stop ‘fooling the people’ is the honest first step out, for the common good.

[Pascal]

Re: AEI says to inflate away housing problem (WSJ)

Ed - Great find with the earlier Makin article! My compliments for emailing him. I have resolved to try to do the same in the future for other published economists and reporters as the opportunity presents. Maybe that's the one thing I can do so that I at least have an answer when someday my grandkids ask me what I did to try to stop the mess before it really blew up.

Fred - Thanks for the link. Great EJ article that is very timely for me even though written in 2005. I've been wrestling with whether or not to buy a particular piece of real estate. Financially, I know it's probably not the best idea I've ever had. Emotionally though, it's very important to my family. Reading iTulip.com and articles like Makin's has just about convinced me that if I can hold it for ten years or so then the odds are at least decent that the printing presses could bail me out.

[metalman]

Re: AEI says to inflate away housing problem (WSJ)

Ed - Great find with the earlier Makin article! My compliments for emailing him. I have resolved to try to do the same in the future for other published economists and reporters as the opportunity presents. Maybe that's the one thing I can do so that I at least have an answer when someday my grandkids ask me what I did to try to stop the mess before it really blew up.

Fred - Thanks for the link. Great EJ article that is very timely for me even though written in 2005. I've been wrestling with whether or not to buy a particular piece of real estate. Financially, I know it's probably not the best idea I've ever had. Emotionally though, it's very important to my family. Reading iTulip.com and articles like Makin's has just about convinced me that if I can hold it for ten years or so then the odds are at least decent that the printing presses could bail me out.

best thing about those graphs is that they are wrong. they show no nominal price loss just inflation. now it's obvious we're going to get some of both, but maybe not together, as in... first the real price whack we got 2006 - 2008 and next nominal prices stay fairly flat while inflation does the rest of the work.

[Ed]

Re: AEI says to inflate away housing problem (WSJ)

metalman,
I reckon that 'real' is not as clear as it might be.
'real' is 'real' is 'real' is 'real' is 'real' is 'real' is 'real', etc.
To illustrate with TIPS = Treasury Inflation Protected Securities, suppose you buy with US$1000. at issue; at maturity, you will receive US$ of unpredictable quantity BUT of predictable purchasing power = the purchasing power that the US$1000. had at issue! (For this illustration, the interest paid along the way is irrelevant.) So, purchasing power is promised.
Ed

[Ed]

Re: AEI says to inflate away housing problem (WSJ)

gphillips,
Thank you! And FYI, I sure wish this weren't true, but ...
"The public be suckered" at
http://durangotelegraph.com/telegrap...24/soapbox.htm
Ed

[t12357]

Re: AEI says to inflate away housing problem (WSJ)

metalman,
I reckon that 'real' is not as clear as it might be.
'real' is 'real' is 'real' is 'real' is 'real' is 'real' is 'real', etc.
To illustrate with TIPS = Treasury Inflation Protected Securities, suppose you buy with US$1000. at issue; at maturity, you will receive US$ of unpredictable quantity BUT of predictable purchasing power = the purchasing power that the US$1000. had at issue! (For this illustration, the interest paid along the way is irrelevant.) So, purchasing power is promised.
Ed

Does Sir Alan knows about the TIPS?

I say because just a few years ago he said:

Greenspan may have provided the answer to how reality is going to play out - he said: "We can guarantee cash, but we cannot guarantee purchasing power!"

Link: http://www.merkfund.com/merk-perspec...005-02-16.html

I would be very careful with what you mentioned.

[metalman]

Re: AEI says to inflate away housing problem (WSJ)

I would be very careful with what you mentioned.

whaddaya mean, dude by 'careful'?

[t12357]

Re: AEI says to inflate away housing problem (WSJ)

whaddaya mean, dude by 'careful'?

I mean be careful to believe the TIPS will hold purcahsing power.

[metalman]

Re: AEI says to inflate away housing problem (WSJ)

I mean be careful to believe the TIPS will hold purcahsing power.

see your title is "new ituliper"

here we trust the indexing on tips the way we'd trust a drug dealer to fairly price heroin to a heroin addict in need.

[zoog]

Re: AEI says to inflate away housing problem (WSJ)

see your title is "new ituliper"

here we trust the indexing on tips the way we'd trust a drug dealer to fairly price heroin to a heroin addict in need.

Don't let metalman scare you off, his bark is worse than his bite.;) Point is, anyone who's hung around iTulip for a while is well aware that the official government inflation numbers (the CPI) are bogus. As the TIPS are tied to the CPI, they will inevitably return less than true inflation. I gather this was what you were saying... metalman was just agreeing with you, in his own special way.

[The Outback Oracle]

Re: AEI says to inflate away housing problem (WSJ)

I reckon having a 'litle bit of controlled inflation' is a bit like having a little bit of cancer!