Nobody's crying for you, America. | 106 comments (106 topical, editorial, 0 hidden)

Re: Nobody's crying for you, America. (4.00 / 2)

European Tribune - Nobody's crying for you, America.

Think of it this way: your mortgage rate today might be at 6%. Two years from now (and this is a very plausible situation) it might be 12%. Hell, it might even be more than that for a while, significantly more, ask any Argentine about the past decade.
No problem, you say? Well, good for you, you get to sit tight in your house, you don't have to move, you have a secure job, and the value of your house, source of wealth for the vast majority of the American middle class, is of no matter to you.
But if you are really worrying about your net worth, you might have to sell your house, you might be near retirement and planning on a move to a condo or smaller home somewhere warmer, things virtually all of us sooner or later think about, this is of concern to you. Because a home's value, like that of a long bond, is simply a function of its yield, expressed in market rates for long term mortgages. In other words, your house is only worth the monthly payment that the sort of person who might be interested in buying it can afford. After all, markets are a signal of value, even in our Socialist worker's paradise where Cheney gets an unheated cell in the Wyoming re-education camp gulag, even if we must vigorously seek to minimize and manage the deleterious effects of their fluctuations.

If you own your house outright then the value of your house is of no concern to you, even if you're hoping to retire to a condo or a warmer place. If the value of your house takes a 40% haircut because of double-digit interest rates, so does the value of the house or condo you hoped to move to, and you break even.

However, if you're worried about loan-to-value of your house, that is, if you're leveraged...

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Carrie (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 07:59:36 AM EST

Re: Nobody's crying for you, America. (none / 0)

The American real estate market has always been very volatile, and I'm not sure that it's hugely different this time around.

I bought a house in 1982 for $87000, sold it in 1987 for $67000. Oops. Market collapse. Employer relocation plan helped me cover the loss.
Bought one in 1987 for $127,000, appraised in 1995 for $90,000. Huge market collapse in progress, especially in condo market, so we didn't move.
Sold in 2000 for $250,000. Boing, the market jumps up!
Bought in 2003 for $230,000, now worth maybe $200,000. If I could sell it at all. Luckily, I have no desire to move right now. (Colorado Springs is so nice! :-) )

So, at least over here, gigantic short term price changes are an EXPECTED CHARACTERISTIC of the real estate market. When prices go up, everybody shifts their situation around, and when they go down, they hunker down and cross fingers and pay the mortgage. And some people--usually those who take larger risks--can get stuck in the middle. But remember, those sub-prime mortgages were enabling people to live in much bigger houses than they would otherwise have been able to afford, and to many Americans, big house = good. They were getting value (to them) from the deal. They will move to apartments, save another $10,000 down payment, and in a couple of years get another "creative" loan.

It seems to me that if the European market is going to be highly risk-averse, then it might be worth it for European bankers to figure out how to simultaneously engage in the globalism thing and at the same time protect against wild swings in the market. Doesn't look to me like you've done that, particularly if your market responds in a more negative fashion to our problems than does our market...

by asdf on Wed Mar 19th, 2008 at 08:32:24 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (4.00 / 2)

Any explanation, in your formulation, for the relatively new (well, since the 1930's anyhow) phenomenon of the tent city?

It's a groqing phenomenon.

Not everyone can get into apartments for now and then get "creative financing" the next time around. And a lot of them have kids; educational development issues? Certainly/

Understood that the more comfortable layers of American society are immune to (and therefore clueless about) the growing incidence of homelessness among the working poor. Your point speaks well to that immunity.

But is limited only to that comfortable layer.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 08:40:02 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (none / 1)

There are indeed homeless people in the U.S., just like everywhere else. And we do a lousy job of supporting them. But in a city of 10,000,000 people a tent city of a few hundred is pretty small. Ratio-wise, we probably have more people sleeping under the bridge here in Colorado Springs.

Unemployment is not (yet) a big problem here. It's pretty easy to get a job even if you have low skills, and apartment rents are quite low. There is certainly a threshold of employability that you must meet, but assuming reasonable health, one can cover the rent. A two-bedroom apartment goes for about $600 a month. If you're making ten bucks an hour as a laborer, you can cover it...

In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc. Unemployment is a personal financial disaster, and a big jump in the unemployment rate is about the only thing that's going to move us towards 1930s-style quasi-socialism...

by asdf on Wed Mar 19th, 2008 at 08:53:00 AM EST
[ Parent ]

Respectfully, you are nuts. (none / 1)

Which other industrialized country has homeless families out on the street? Which other industrialized country has seen a 50% increase in homelessness over the past ten years, during economic "good times" supposedly?

Nope, you're engaging in typical US bourgeois denial of what's going on, the sort of ideological cluelessness which is a part of the problem.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 08:58:30 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (none / 0)

I think you might be taking a sort of a narrow view of the rest of the world's approach to these sort of problems. For example, there are squatters in Paris, which is something that essentially doesn't exist in the U.S. And there are homeless people in Britain, and Roma who would be categorized as homeless in the U.S. It's a problem everywhere.

http://www.networkeurope.org/feature/under-priveleged-roma-children-of-south-east-europe

I'm not going to argue with you about my personal viewpoint, but I don't think I fall completely into the bourgeois denialist category...

by asdf on Wed Mar 19th, 2008 at 09:20:48 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 3)

asdf:

For example, there are squatters in Paris, which is something that essentially doesn't exist in the U.S.

Yes, the US does have stronger enforcement of the rights of absentee owners. I personally am sympathetic of squatters - call me a dangerous ~~pinko communist~~anarchist.

In any case, Paris actually has its fair share of people sleeping under bridges in tents. Many of the tents were provided by humanitarian NGOs. Geezer in Paris may have written about that in his diaries or comments.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Carrie (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 09:24:23 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (none / 1)

You are a dangerous pinko.

However, I was in Panama not too long ago, where land tenure issues are a big problem, and the lack of landlord rights has a bunch of really obvious and bad side effects of its own. Maybe the thing to do is have strong protection of land ownership, and then approach the problem of homelessness in some other way.

by asdf on Wed Mar 19th, 2008 at 09:36:58 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 2)

Squatting can prevent some of the worst aspects of property speculation. City houses are meant for living, not capital accumulation. If you mean to invest in property, you should at least let it.

by nanne (zwaerdenmaecker@gmail.com) on Wed Mar 19th, 2008 at 10:26:39 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 2)

There are homeless people all over the world, including under bridges, in Paris, especially in London, in Berlin.

What there do not tend to be are homeless families, particularly, homeless single women and their children, like onee sees in America. There were, before this financial crisis began last summer, over a million homeless women and children in America. This is paternalism combined with calvinism and it is a particularly toxic stew for women and children, something you just don't see anywhere else in the industrialized "west".

If you can show me homeless people like that anywhere in the industrialized world outside of America, please I'd like to see the evidence.

And excuse me, but I lived near a Roma camp for some time in France, and it was anything but what you describe. I am aware of terrible conditions for Roma, especially in new entrants (ie developing entrants) to the EU and also in Greece especially due to the olympics and construction there. A tent village in Sacramento, housing families, is not the same. Not by a long shot. The comparable thing I've seen in my life? Temporary refugee camps along the border of Pakistan and Afghanistan.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:11:13 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 3)

I'd like to learn more about squatter's rights in the US because I recently met a woman who squatted with artist friends in a building on the lower East side in Manhattan back in the 1970s. They ended up getting the rights to the building for a dollar. By the 90s, they had become involved with the city's arts community (gainfully employed) and managed to secure a multimillion loan with the building as collateral, and with that money they started a very successful non-profit arts organization.

by Upstate NY on Wed Mar 19th, 2008 at 01:57:34 PM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 3)

All of them have those problems, as far as I know. to some extent or the other. It seems to me that you're letting anger cloud your view of the evidence. The increase in homelessness is another matter.

The core difference is the extent to which the countries see those problems as a failure of government and the country as opposed to a personal failure of the people involved: often the personal failure is put on them by calling them gypsies, or depending on their unfortunate ethnic origins. It the US it just seems to be mainstream thought that anyone who finds themselves in that position is to blame for it.

by Colman (colman at eurotrib.com) on Wed Mar 19th, 2008 at 09:26:46 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 2)

"It the US it just seems to be mainstream thought that anyone who finds themselves in that position is to blame for it."

Maybe that's a bit of an overstatement, because there is lots of sympathy for people who are sick or unemployable or mentally ill. What there isn't is wide support for governmental intervention.

by asdf on Wed Mar 19th, 2008 at 09:33:36 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 3)

Sympathy != support.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 20th, 2008 at 08:05:54 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (none / 1)

With attention directed to the evidence on the composition of homeless in America: the face of homelessness in today's US.

Homelessness in the EU, particularly the Eurozone, is largely limited to the mentally ill, the chemically dependent, and new, unauthorized migrant workers.

That's decidedly not the face of homeless in the US, as anyone who's worked at a Dorothy Day center can tell you in a heartbeat.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:14:37 AM EST
[ Parent ]

Re: Respectfully, you are nuts. (4.00 / 2)

You probably have a point on the homeless mothers and children: I'm not aware of them being left by the side of the road here, though I understand that they can end up in a pretty hellish sequence of (state-funded) bed-and-breakfast accommodation and temporary hostels since there is inadequate provision for proper support and accommodation.

by Colman (colman at eurotrib.com) on Wed Mar 19th, 2008 at 10:22:19 AM EST
[ Parent ]

You must be talking about Ireland. (4.00 / 3)

I understand that they can end up in a pretty hellish sequence of (state-funded) bed-and-breakfast accommodation and temporary hostels since there is inadequate provision for proper support and accommodation.

State funding? Bed and breakfasts?

That's gotta be Ireland, cuz that ain't how it works in America. Shelters go out hat in hand and rely largely on charity, just like in the 19th century for most of Europe. That's actually one of my sisters' job, going out with the hat.

OTOH, refugees in France do tend to be lodged in hotels, often for long periods of time.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:44:16 AM EST
[ Parent ]

Re: You must be talking about Ireland. (none / 1)

Obviously, I was talking about Ireland.

by Colman (colman at eurotrib.com) on Wed Mar 19th, 2008 at 10:49:07 AM EST
[ Parent ]

Re: You must be talking about Ireland. (none / 1)

Oh shit, my bad...I didn't see the word here.

I must have gotten my Irish up overmuch. Sore subject for me, hits very close to home.

Sorry.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 11:21:19 AM EST
[ Parent ]

And angry? You bet. (4.00 / 3)

I listen to this denial drivel all the time, it goes with the territory of what I do for a living.

I was polite the first time, but when the interlocutor is persistent in pressing the mistaken and insouciantly inconsiderate view of "its all the same everywhere" which is, let's be honest about it, a variant on the theme of "sucks to be them," my patience wears pretty thin.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:17:00 AM EST
[ Parent ]

Re: And angry? You bet. (4.00 / 6)

Yup, a conversation I too had on several occasions in the US.

Them: It is the same everywhere. The problem can't be solved.
Me: No, we don't have homeless in Sweden, beyond the few drunks or drug addicts.
Them: Ahh! But you have such high taxes!!
Me: Yeah. Welfare isn't free, you know. But the problem is solvable. Saying it isn't because it requires high taxes pretty much just makes you a greedy bastard.
Them: No, no, no. We believe private charity can do the job better. I give to private charity! I'm not a heartless, greedy bastard.
Me: Really, yes you are. Clearly the problem requires funding beyond your token private charity provisions. Or it wouldn't exist anymore. As we have a concrete example of it being done better by government elsewhere, your belief in private charity is pretty much demonstrated false.
Them: Yeah, but your taxes. They are so high...

by someone (s0me1smail(a)gmail(d)com) on Wed Mar 19th, 2008 at 11:42:40 AM EST
[ Parent ]

Re: And angry? You bet. (none / 0)

Well, they are going down, thank god.

The latest thing is that the EU blocked tax cuts for service workers (thank Brussels, that was a really stupid tax cut) so instead the government will cut employment tax (hidden income tax) from 21 % to 15 % for people under 26. Everyone else pay something like 30 % employment tax (and on top of that the ordinary taxes of 30-50 %).

So yes, it's a good day to be under 26 in Sweden. :)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 19th, 2008 at 11:51:32 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (none / 0)

In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc.

And that's a big problem. Sure, there should be a very big financial differnce between having a job and not. People shouldn't have any incentives to live on benefits.

But why should corporations do pensions, healt care, insurance and another ten thousand things? In neoliberal utopia(tm) those things should be financed by the individual. In a more reasonable world, most of those things are done by the state and financed via taxes.

The current US system is just stupid, putting strain on the competitivity of firms while utterly ignoring the needs of the unemployed.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 19th, 2008 at 09:05:38 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (none / 1)

I agree with you that the U.S. system has some pretty huge shortcomings, particularly in the lousy support of the unemployed, the sick, and the elderly. I'm not defending it...

by asdf on Wed Mar 19th, 2008 at 09:14:33 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (4.00 / 2)

asdf:

In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc. Unemployment is a personal financial disaster, and a big jump in the unemployment rate is about the only thing that's going to move us towards 1930s-style quasi-socialism...

I thought the lesson of the 1930's was that unemployment should not be a personal financial disaster, and moreover the New Deal showed that it was possible to make it so it wouldn't be.

How was that forgotten?

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Carrie (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 09:18:37 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (4.00 / 3)

Because the New Deal was a plot by the Communists to take over the world? Because Americans have short memories? Because there's a theory of making it on your own?

I think the bottom line is that America has not yet had as big of a disaster as Europe had in the mid-20th century.

by asdf on Wed Mar 19th, 2008 at 09:23:31 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (none / 1)

I think you hit something right on the head, there.

"I said, 'Wait a minute, Chester, You know I'm a peaceful man...'" Robbie Robertson

by NearlyNormal on Wed Mar 19th, 2008 at 06:17:58 PM EST
[ Parent ]

Re: Nobody's crying for you, America. (4.00 / 3)

If you're making ten bucks an hour as a laborer, you can cover it...
In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc.

And if you're not making ten bucks an hour? If you're not getting benefits?

See What The Jobful Get for a non-mythical look at US employment.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Mar 19th, 2008 at 11:47:30 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (none / 1)

Any explanation, in your formulation, for the relatively new (well, since the 1930's anyhow) phenomenon of the tent city?

"Survivor: Outer Los Angeles," coming this fall to CBS.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 19th, 2008 at 02:33:32 PM EST
[ Parent ]

Re: Nobody's crying for you, America. (4.00 / 2)

Right.

In technical terms, redstar's saying that a house is (typically) a 30-year 100%-coupon bond. Interestingly, the interest-rate sensitivity of the price of a bond is called its duration and a 30-year bond has... well... a long duration and therefore a large interest rate sensitivity. For his chosen example of a 30-year mortgage at 6% the duration is something like 21 years.

So, if your interest rate goes up by 0.1% per year, you multiply that by 21 years and you get 2.1% as an estimate of the drop in the value of the house. If you have an ARM not only the value of your house goes down, but your interest payments also go up. Not nice. But you only care about small movements like this if you're speculating in real state. IMHO a first home is not an investment, it's a home, but a mortgage does have this kind of risk which I don't think is quantified in just this way by mortgage ~~advisors~~salesmen. It might be obvious that the term of the mortgage is roughly equal to the interest rate sensitivity of the resale value, but ordinary mortgagees are not generally aware or made aware of this fact. [Fortunately for mortgagees, duration decreases as interest rates rise, so by the time you've moved from 6% to 12% you're no longer talking about 21 years' duration but something like 9 years - again, duration is only directly applicable to small movements]

It is interesting that for a 30-year mortgage going from 6% to 12% is a 40% drop in price to 3 significant figures. Anyway, regardless of how accurate it is, redstar uses the 40% haircut to great effect.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Carrie (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 09:10:58 AM EST
[ Parent ]

Re: Nobody's crying for you, America. (none / 1)

I've seen two viewpoints on residential real estate. Some people buy a house to live in, and work to get it paid off. Maybe 10% of buyers do this. The rest push the envelope and get the biggest loan they can (usually the max mortgage payment is about 30% of your monthly gross income), based on some theory about selling it later; this is the "real estate ladder" theory, although that term isn't used here.

But the critical difference, perhaps, is that in the U.S. it's widely recognized that the real estate market is very volatile. Everybody knows this, and it's just factored into the personal financial risk calculation that everybody makes.

by asdf on Wed Mar 19th, 2008 at 09:28:44 AM EST
[ Parent ]

Nobody's crying for you, America. | 106 comments (106 topical, 0 editorial, 0 hidden)

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