Tuesday, September 27, 2011

Citizen's Dividend

In my debates on politics and economics I've looked at a number of different ideas. Such as the French idea of sharing the available real work.. with their 10 weeks vacations, 35 hour work weeks and so forth. Which is really a continuation of the New Deal policies.

But first off that still won't work in the long run when near 100% of money producing work is automated. And secondly it just doesn't work with a free society, where no one is telling you how many hours you are allowed to work, and of course the monitors to make sure you are complying.

The citizen's dividend deals with it all cleanly in one shot. I estimate the USA is already able to give 800$ a month per man, woman and child. So a family of four would get 3200$ a month tax free. Almost enough to survive on. There are many possibilities with that foundation, like the woman deciding to go part time.. which frees up work for someone else.

Saturday, September 3, 2011

The real crash steps for real estate

We now have seen a number of crashes around the world so looking in depth at what happens in them and you can see the same pattern everytime.  Because of course it is human beings in all cases who respond the same way.  So I first saw the real estate crash in Florida, then in Nevada and Arizona, then the mother of all crashes in California, then Ireland.  I was blog reading through all of them.

The first phase is buyers stop.  Of course there is still a few sales but the volume of sales drop say 50% yoy when looking at monthly comparisons.  There is then a 'Mexican standoff' for 18 to 24 months.  Where sellers won't lower the prices and an interesting point is that in all cases buyers were still trying to pay top dollar.  Its not just sellers who are emotionally invested with real estate always going up, ironically buyers don't want to imagine the market going down.  [b]Everyone buys real estate believing it is an 'investment'[/b].  What happens is buyers simply can't get access to credit.  So we see the bizarre situation where people are continuing to make offers on homes, but the deals keep falling through when the banks won't give the credit.  -the UK besides greater London is clearly at this point.

The second phase to crash guru bloggers is called the 3 d's.  Its where people must sell for one reason or another, death, divorce, distress(job loss).  But I realized this is wrong.  When I looked at individual examples.. even when forced to sell, sellers will not sell for less than the market high.  The main reason for this is most people have gone all the way on the home equity lines, so to sell for much less would instantly bankrupt them.  [b]Therefore they literally cannot lower the price.[/b]  Yes there is the very odd sale that goes through, and lasts on the market for 2 days, like a smart family gets an inheritance and just dumps it.  But this is a small part of the market.  Don't underestimate the emotional attachment to a price too, if someone has built up their retirement on a certain selling price they emotionally can't lower it.

The real second phase is these houses sit on the market literally until the people get foreclosed.  I've seen it happen time and again.  This phase can last like two years.   

The third phase is the real place the crash happens.  The bank now forecloses and is holding the property.  They idiotically won't sell it for less than the note is worth either, because they dont' want to admit a loss - which on their books this loan is still not recognized as a loss.  But then they have to start paying the expenses of upkeep.. like maintenance, and property taxes and such.  [b]Well at this point the accountants in London almost have a heart attack, because these are operating expenses.  They have to report those expenses this quarter![/b]  Its at this point that the bank wants these off its books AT ANY COST. 

Once the banks pull the trigger its unbelievable how the market falls apart.  Right now in Britain the banks are just starting to end up with a number of foreclosures.