“Extend and Pretend” forevermore.
By Wolf Richter. This is the transcript of my podcast last Sunday, THE WOLF STREET REPORT. You can listen to it on YouTube, and you can find it on Apple Podcasts, Spotify, Stitcher, Google Podcasts, iHeart Radio, and others.
Until a few months ago, most Americans didn’t even know what “forbearance” was. Now, roughly four million home mortgages, or about 8% of all home mortgages, are in forbearance. Those four million households with mortgages in forbearance might still not fully understand what forbearance is, but they know one thing: They don’t have to make mortgage payments for a while, and they get to spend that money on other things instead of sending it to the bank.
There are forbearance deals offered by lenders for credit cards and auto loans. I don’t owe any balances on my credit cards and I don’t have an auto loan, but my inbox gets blasted with offers of forbearance anyway, by every bank I do business with.
My WOLF STREET media mogul empire too. It’s just a tiny business, and it doesn’t owe any money, but sure enough, my bank is offering “assistance” with those debts that my business doesn’t have.
When a lender agrees to grant the borrower forbearance, the lender agrees to not exercise its rights when the borrower doesn’t make the loan payments. There is an agreement both parties sign, and this forbearance agreement determines, among other things, the period of forbearance, and what happens afterwards. And afterwards those missed payments will have to be made up somehow. Forbearance is not forgiveness.
But a forbearance agreement can be extended, if both parties agree to do so. In banker’s lingo, it’s called “extend and pretend.”
So, the borrower is not making payments, and the bank doesn’t receive interest and principal payments, but since the loan is in forbearance, the borrower is not deemed in default and the lender can continue to show interest income on the loan, though no interest is being paid.
That’s the motivation for lenders: Rather than having to show the loan in default, and taking a hit on their earnings, they can continue to book unpaid interest as income, and show the loan as performing.
Some people want forbearance because it would be nice not to have to blow a bunch of money on mortgage payments or credit card payments or auto-loan payments, and instead be able to spend all this money on other things.
Other people want forbearance because they lost their job or businesses, and financially all heck has broken loose in their lives.
Other people again want forbearance because they lost their jobs, and even with the extra $600 a week in federal unemployment benefits, they still can’t meet their mortgage payments. This is a real problem in expensive markets with high salaries.
In its latest report last week, the Labor Department said that nearly 32 million people continued to claim either state or federal unemployment benefits. 32 million people is a lot of people on the unemployment rolls. That’s 20% of the workforce.
So then there is the whole category of unpaid rents. Depending on who is doing the counting, the number of renters who haven’t paid their rents is either huge or just a small-ish increase over normal. No one knows.
According to the National Multifamily Housing Council, which represents landlords with large apartment buildings, 91.3% of apartment households paid their June rent as of July 20. This is down only two percentage points from July last year.
On-time rent payments – meaning June rent paid by July 6 – dropped by 2.5 percentage points, compared to a year ago, to 77.4%.
OK, a couple of percentage points worse than a year ago isn’t the end of the world, but applied to tens of millions of renters, it’s still a large number that are now in trouble, that weren’t in trouble before the pandemic.
Internet-based surveys of renters have been all over the place, many of them with far higher non-payment numbers, but they were just internet surveys.
Extend and pretend works with rents too.
There is rental relief, at the local, state, and federal levels. These generally take the form of eviction bans. Local eviction bans mean that the local government suspended eviction filings and will not process evictions until a certain date, and they may put other restrictions on landlords.
The federal rental relief under the CARES act provided eviction protection for 120 days. But it pertains only to apartment buildings that have been financed with a federally backed mortgage, and buildings covered under a couple of other federal programs. So it doesn’t apply to all buildings.
And there are now anecdotal reports of renters not making several months of rent payments and using the money thus saved, plus the stimulus checks, to contribute to a down-payment for a house.
All these rental relief laws mean only one thing: The landlord of a covered building cannot evict. However, the rent is still owed, and the landlord can still pursue the tenant for the rent. The obligation of paying rent doesn’t go away. The tenant is still on the hook for every month of unpaid rent, no matter what they did with this money. And this will become a huge mess after the eviction bans end.
There are similar rules in some places for commercial rents, and this impacts retail stores, bars, restaurants, nail salons, and the like – and their landlords. In addition, many companies have just stopped paying rent, taunting the landlord with: “Go evict me” – since another tenant for that space cannot be found anyway.
Then this chain of non-payments filters up the pipeline. The landlords don’t receive rental payments. Most properties are leveraged, and landlords have to make mortgage payments.
If landlords don’t receive some rent payments for a month or two, they’re able to work around that. But if they don’t receive any rent payments for four or five months, it gets more difficult. We’re now into the fifth month of this. And then landlords fall behind on their mortgage payments.
So far, delinquency rates of mortgages on apartment properties have risen but haven’t exploded higher – unlike delinquency rates on mortgages of hotel and retail properties that have been packaged into commercial mortgage-backed securities.
These delinquency rates on hotel and retail properties have exploded into the 20% range in June. There too, lenders can agree to forbearance, which would pull delinquent properties off the delinquency list. Extend and pretend.
When borrowers default on mortgages that have been packaged into mortgage-backed securities, both residential and commercial mortgage-backed securities, then the non-payments filter further up the pipeline to servicers that manage those mortgage-backed securities, and then either to investors or government entities, such as Fannie Mae, Freddie Mac, Ginnie Mae, the FHA, and others that guarantee or insure the mortgage-backed securities.
In these cases, the whole payment pipeline has stopped, everything has been put on extend and pretend, and no one knows how to get the payments flowing through the pipeline again and what happens afterwards.
Some of the protections have recently expired. Others will expire soon. Some of those expired protections have already been extended. Others will likely be extended. Forbearance at the household level will be extended to the maximum possible, if the alternative is a default. No one wants a default. So, extend and pretend rules.
As I mentioned a minute ago, 32 million people continued to claim either state or federal unemployment benefits, and they also got the extra $600 a week from the federal government. That $600 is now expiring. And then what?
They will be extended in some form. Congress is currently trying to come up with another stimulus package. In its final version, the $600 a week may be cut down or face other limitations when it’s finally passed into law.
So now, everything is set on extend and pretend. Homeowners don’t default on their mortgages; they just enter forbearance. Renters don’t pay rent – and can’t be evicted. Borrowers with big credit card balances and 30% interest rates don’t even have to make minimum payments after they go into forbearance. Same with auto loans.
But all these missed principal and interest payments will be added to the loan balance, and the problems will be worse in the future.
Subprime auto loans and subprime credit card loans no problem: instead of being delinquent, they’re now in forbearance.
Credit scores reflect loans that are in forbearance as performing loans. So no hit to credit scores.
Landlords cannot make their mortgage payments, and also enter forbearance. Lenders still show all these loans as performing since they’re in forbearance but no payments are being made.
And instead of flowing up the debt pipeline, the cash is being spent on consumer goods and services. This is one of the reasons retail spending has recovered so quickly.
But no one has yet figured out how to get out of this. The path in view is extend and pretend.
These people don’t have the money to catch up on the missed rental payments, because they spent this money on other stuff, and there is a wave of evictions and court cases that loom, unless extend and pretend further kicks the can down the road.
But then landlords are truly toast, unless that can is kicked further down the road.
For homeowners in forbearance, the missed mortgage payments can be added to the principal of the mortgage, which eats up equity in the home, but eventually, the mortgage payments need to restart too, and if not, the mortgage will go into default, unless that can is kicked further down the road.
The mortgage-backed securities that rely on the cash flow from the mortgage payments are already quaking in their boots, and that is why the Fed stepped into the market so massively, trying to kick that can further down the road.
Never in my life have I imagined that I would see such a gigantic mess, with so many bailout deals that cost trillions of dollars in so-called stimulus funding every few months to kick all those cans further down the road, without any plan or idea how to ever catch up with all those missed payments and how to get out of it, and what might happen to consumer spending, if consumers are having to catch up with those missed payments and having to make current payments again.
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“Never in my life have I imagined that I would see such a gigantic mess”
If you mean in the US, you’re certainly right.
At present, the world’s highest inflation rate is in Venezuela, where the annual rate is 15,657%. Between the inflation, the corruption that reaches every corner of the country, Venezuela is so messed up that it makes the United States look like a paragon of virtue.
Thanks for the great podcast!
well since we haven’t had REAL BUSINESS CYCLE since GREENSPAN
this is APPROPRIATE and THE mal-investments need to come home to roost
NO MORE BAILOUTS NEEDED
and WE NEED TO EITHER BE ABLE TO EVICT or local govt needs to take THEIR UNPAID RENT as VOUCHER FOR PROPERTY TAXES – in that way local govt who put moritorium in place gets paid with appropriate PAPER
The evictions will start shortly since no relief bill was passed. The Senate’s petulant adjournment means that our economy will plunge even further. I suspect that the number of businesses that will fail and persons who will lose their homes will now explode.
God help us all.
I agree with much of what you say but nothing can make what is going on in the US appear at all virtuous. In dollar terms, even per citizen, the “Federal” Reserve and its banksters and the rest of the Wall Streeters have taken from Americans much more money than any Venezuelan or other crooks could their countrymen. If those direct transfers stopped, I am sure that the “Fed” will or is giving US dollars to other nations’ banks or other persons to then indirectly funnel more funds to its banksters.
Venezuela is being prevented from selling its oil, and that apparently is all that it can sell, so it is natural that it would be close to collapse financially. However, the “Fed’s” decades of 1) ultra low-interest rates to banksters while they gamble with derivatives, Forex, etc., 2) “Federal” Reserve dividends to its districts’ members banks which are then ultimately paid to banksters, 3) effectively guaranteeing of all banksters’ gambling/investments so that they get credit access to their often-insolvent entities, 4) interest payments to banks on their “holdings” with the “Fed,” etc., have transferred more US legal tender to the banksters per US citizen than any corruption ever transferred per citizen in any other country.
Even now, since I am certain that the real estate market will go down like a falling rock, it is likely that many or all of the major banks are legally insolvent. Their real, realizable net capital was always minimal and overstated in present dollar terms. Their assets are now probably worth a lot less than their debts and liabilities.
They probably could not even sell all of their real estate backed mortgages or real estate holdings for anywhere near their book value now. They cannot sell them, because then they would have to realize and report huge losses in financial statements, which would make most or all of them clearly, legally insolvent.
If the “Federal” Reserve were dissolved or if congress got a spine and required that convertible bonds convertible to 999% of outstanding shares were paid over in exchange for any “Federal” Reserve aid or congressional bailouts, the banksters would own very little or nothing. If the government/”Fed” aid ended, most major banks would probably shortly be in bankruptcy.
red pens out. maybe while everyone w/ a bath tub works on a vaccine, the lab rats get some real cheese. all states equal unemployment percentage of salary, example 75% include all out of work force citizens with or w/o recent tax filings w/monthly figure, all others compensated by last employer/s. extend eviction protection to all, reduce unemployed and closed businesses rent/ mortgage/debts by same % as salaries. reduced obligations/ commitments not met will void leases/ deals and allow evictions/foreclosures/repos to proceed. universal health coverage incl testing, vaccines etc and to deal w/ follow on problems from c19, 20.. etc. ceiling/ price controls rent/ groceries/ medicines/ energy etc. trim/ delay conditionally, help for business except individual unemployment same as above until virus conditions allow reopening for biz/schools etc w/ ppe, contact tracing, etc.. per independent science. federal gov monetary support for all above. damage flows back to origination. don’t touch ss/ withholding or raise taxes. let this remain open ended, this phase stuff just instills fear, hunger and uncertainty which will hamper health/ recovery. reduce congressional salaries to match, to garner attention and apply some giddyap.
Does anyone understand what Tommy runner has to say?
I am totally confused by the financial markets and economy but that beats it.
Maybe if he used capital letters when starting a sentence, everything would fall into place? Also, complete sentences would aid to the clarity.
Bullet points would also help. But I still understand the post as is.
Yeah, basically he’s saying that the pooch has been screwed, and screwed ROYALLY!! And I have been trying to tell people this stuff since about 1996, when I learned about how fiat paper currency financial systems actually work! They use the cheapest feed stock that can be found, old cotton rags, and then create fiat paper currency out of them! The REAL cause of what we call inflation, is the decrease in the perceived purchasing power of a fiat paper currency. Most of the time it happened rapidly, but now with computers and ultra fast communication systems, the one generation time line has been extended and pretended many times over! But EVERY party has to come to an end one day, and it’s when the free food and drinks run out. Then everyone runs for the doors, if they can find any to exit through!!
Do you think feds/congress will eventually be forced to bail out everyone who missed rents/mortgage payments for months on end?
While people are using their unemployment/stimulus/paycheck money to YOLO into robinhood or buy the latest iphone instead of paying rent, there’s no way they can be expected to pay a lump sum of all the months of missed rent payments once the bill is finally due.
In fact, people may purposely not be paying with the intent of relying on a bailout.
From the very beginning that seemed to me to what drove many people to not pay rent, the expectation that the government would eventually have to cave and declare a debt jubilee. There has been talk of that for a decade for student loan forgiveness, but somehow it never materializes. And now I’m thinking that many people are positive that Biden has a cakewalk and that, unlike Obama, he’ll actually do something for the downtrodden. The disappointment will, this time, I think, more quickly turn to rage, and we’ll end up with something even more strange than Trump.
100% unemployment, $1 million daily ubi, empty store shelves, and people in rags buying stocks admiring their quadrillion percent gains while fainting from dehydration.
I called it. Remember this.
Name one person who spent their unemployment check on an iPhone instead of paying rent. This sounds like the story about people skipping two or three months of rent to fund a down payment on a house. Even a 10% down payment is a lot more than a few months rent.
Low end folks tend to pay their rent if they have the money to do so. When the 2009 crisis hit, most people I knew kept paying their mortgage. It was the well off, financially sophisticated people I knew who walked away. Even now, it’s Joe Blow paying his rent, but the big retail chains sending goose eggs to their landlords.
Curious, all this speculation about where the money is going from the delayed debt payments, yet not much being said about the past and present mountains of $$$ going to the supposed ‘top end’ of that debt structure!!
Pretty good article on the hedge that the solution is going to be the Fed government giving loan guarantees to a lot of institutions for debts. It counts as an asset on the government books so it doesn’t blow up the defecit right now in same way student loans are an asset.
The opinion piece said it’s all going to come out of saver’s pockets as they are trying to get inflation 3 or 4% above savings rate for a couple of decades to work off the debt. Who knows?
Thank you, Wolf.
Here in San Francisco, I have been informed that 20,000 plus eviction notices have been filed. Landlords are waiting for the expiration of the Eviction Moratorium currently set for August 31, 2020.
I was also informed that since Ross Dress for Less reopened a few weeks ago, the stores have been packed with shoppers wearing their masks! Some stores have had to hire more store & security staff!
This irrational ‘consumer’ behavior of shopping for whimsical gratification with unemployment and stimulus monies, instead of paying to essentials like rent/utilities or mortgage is frightening to witness.
The emotional well being of what goes on behind closed doors in people’s private lives due to sheltering in place, 6 ft social distancing, and now mandatory mask-wearing while in public space seem positioned to implode. I sense another lock-down nationwide during the late fall-winter season up to March 2021!
The current Gaslighting style of the Federal & State Unemployment Extensions by both political parties, fueled by mass media fear laced journalism, sets the stage for more anger and fury of the rich and poor citizens.
On a macroscope view, in view of massive layoffs, high unemployment, slow business growth, why can’t the politicos give what the people truly need for now until the economic and financial momentum stabilizes?
After all, these 4 months are very critical for each Presidential candidate.
Thank you for listening.
It could be that those shoppers were using their checks to fulfill latent demand, which is actually a very good use of stimulus money – to actually stimulate the economy, and meet real needs! Ross Dress for Less is hardly the place to go to spend frivolously!
That tidbit about eviction notices is frightening. Any appreciable fraction of those 20,000 families becoming homeless is going to completely explode San Francisco’s already dire homelessness crisis.
Well, from a landlord, it would be nice if Ross paid there rent. They were the first to demand relief from landlords.
Well said. Now we have the realization of seeing the attitudes of so many people that we never really understood were present. Instead of being prudent with the stimulus, so many are living for Now only, taking advantage of the situation to push out financial responsibility. These people can’t feed themselves, but must be fed. A nation of spoiled fat babies. In their minds, when the money is spent, the solution will be to riot in the streets.
I live in a small place where you actually know the people who go out and splurge when everyone else knows they should pay their bills. It is maddening. It’s a mindset hard to understand, but it has been explained like this to me.
If someone is always in debt, or never had much of anything, a sudden cash influx is just a delightful windfall. It is something to hurry up and use because it most likely won’t come back again (because it never does). Multiply this by a few generations, model it to children, it is virtually impossible to expect something different. I have poor neighbours who smoke at $10 per pack. Drink when they are out of work, etc etc. My son rents out a spot on his property to some folks who have been reduced to spending their final years in an RV because of this behaviour. Some months they can’t pay their nominal pad fee even though they are both on disability pensions. They buy WalMart toys for their dog all the time. They both smoke. But you know what? They are actually doing the best that they can. As tenants they are a pretty good security system to be honest. They keep an eye on the place a lot better than roving rent-a-cops as their trailer is located next to a storage building full of electrical gear.
Chris Christie has received 240K+ for lobbying efforts after the pandemic hit; lobbying for businesses to get help. He is a fat blob. Now I ask you, who is worse? Someone who goes out and quickly spends their windfall, or someone on the acceptable side with an inside track to obtain and increase prosperity.
It’s all the same to me.
The real issue for us as a society is how does financial prudence and conscientiousness survive when its practitioners are spread out and isolated among an overwhelming majority of spendthrifts who only think short-term? If you have children today, what is the likelihood they’ll learn to look down on smartphones as silly gadgets that they want nothing to do with? Facebook, Amazon, and Google are supplying the meme-ware for our children, while our role is reduced to feeding and clothing them.
“Multiply this by a few generations, model it to children, it is virtually impossible to expect something different.”
I taught at a remote, rural combination junior-senior high school were the primary source of income for most parents was welfare supplimented by seasonal under-the-table service jobs. I learned first hand that the old adage that ‘an apple does not fall far from the tree’ is true, almost without exception. The students whose parents were hard working and educated became, too, hard working and educated adults. The students who lived with a single parent on welfare (yes, a stereotype, but nonetheless accurate) became the next generation of single-parent welfare families. Yes, it is mind-numbing maddening.
Familial culture is one tough cookie to break.
The way I have read it MiT is that Mozart was a late child of a single mom… of course I don’t know that for fact any more than I know for a fact that the universe is a result of the Big Bang…
Point is, in spite of the ”likely hood” of what you say re culture, etc., there is also a lot of potential for the very opposite.
Many on here cite their parents going through the depression FKA the greatest, as the reason they are frugal, etc., but mine, born in 16 and 22, partied through that depression and kept on partying until they died… and the majority of their children (that I know of ) are careful and have no debt, etc., etc.,
IOW, there are tons of ”outliers” in any kind of analysis of human behaviours, certainly including many of those who have been raised by single moms on our current welfare systems, along with many on ”the dole” in past systems.
and BTW, to be sure, I ”worked” my way through colleges, full time in classes and working, including at the time, allegedly ”the best public university” in USA, with the help only of the GI Bill, ($90/month,) and borrowing only when needed to complete the current session, dropping out to work, pay back loans ASAP, several times, etc.
Does not really seem to be possible these days, which alone is a real shame on all of us older folks to have allowed that.. And something WE the Peedons should insist becomes not only available, but practical for those willing to do so!
Thanks Paulo. I think Bernadette is wrong about “irrational ‘consumer’ behavior” – someone who was just arbitrarily forced out of their job by government mandate, unemployed and facing a long spell of minimal work, but still wanting to LIVE, might consider an option to live rent-free for a few months very valuable. The potential, eventual eviction penalty … so what?
Well it’s a decent way of holding the elites hostage when they see the economic numbers surge back by giving the people money. Once the spigot closes, watch stuff tank again? If we don’t see inflation despite all the spending, there’s all the evidence you need that the economy can easily provide for people with far less work. Maybe a lot of these jobs really were unnecessarily pointless. But, since a human’s natural environment is wittling away time hunched over a computer, what other option is there but to create work for them?
Imo if people need 40 hours of work, many people who otherwise would continue turning into lumps would benefit from the experience of working construction building out advanced infrastructure. I would prefer massive infrastructure spending to a ubi (beyond something small).
Yes, the biggest problem with the US is people who have never had a decent paycheck in their life suddenly misspending $600 on cheap clothes for their family in an economy desperate for any spending at all.
The problem with the US definitely isn’t a coddled sociopathic ruling class that has access to nearly infinite amounts of virtually free money that is uses to create asset bubbles that make it impossible for lower economic classes to pay their rent, get decent or any healthcare, or send their kids to college.
On Wolf wonderful site, in general, one is supposed to add a tag for sarc 2B,,, not to say I disagree with anything you say, because I do not!
Crazy crazy BAD and getting worse IMHO, not at all like the era after WW2 when the oligarchy let at least most willing to work and willing to have been either cannon fodder or working ”round the clock” to provide supporting munitions, planes, tanks, etc., etc. for those on the fronts be able to buy homes, raise kids in tranquillity, etc..
While I have long had the idea the same oligarchs who allowed such ”largess” to WE the Peedons as reward for saving their ass-ets then,,, also recognized that there was a real possibility of a person similar to WW2 German one, rising sooner or later in USA, with the difference that USA had an absolutely world dominating manufacturing capacity that Germany never did,,, and so subsequently, our masters/rulers did all they could, mostly successfully, to drain USA manufacturing to prevent another joust at total world control by one country.
Clearly, it is time and enough to do our best to get the world back into balance, and we can at least hope that this time that balance with last a lot longer.
The NYT came close to identifying why the US has the worst Covid results medically: Because such a large part of the population has not access to affordable healthcare. Because of lack of healthcare access, tracing is virtually impossible to do in the US because our testing is too slow and also people fear if they test positive they will have to get care/isolation they can’t afford, unlike in other nations.
This is why nations with low cost/socialist/mixed healthcare have generally performed so much better than the US.
Until it is solved medically, Covid will likely affect the US more than nations that provide their citizens with affordable healthcare.
I am reminded of the 2000 recession when car repossession became a big industry. They even had reality TV shows about them. I foresee a similar situation happening today with evictions.
Yea shame on those fat babies! They should have incorporated first.
Be great if moral outrage had built-in proportionality.
“…that since Ross Dress for Less reopened a few weeks ago, the stores have been packed with shoppers…”
We live a couple of blocks from a Ross, and I walk by it all the time. I have seen no crowds at all. The whole shopping corner there is dead. But I do see that ecommerce is booming… I see the delivery vehicles stopping everywhere.
Who is goint to do the evicting? And how long will that take?
And more importantly, who does the landlord think will replace the evicted tenants? I do volunteer work with the poor in CO and have already seen one landlord voluntarily drop rent to keep a tenant who had a decrease in work during the shutdown.
That’s very kind. But some landlords still have to make the mortgage payments.
And when there is no one around willing or able to pay their mortgage for them?
The actual evictions issue is going to be one of the biggest unexpected outcomes of the protests in places like Portland. There are now thousands of people who are no longer afraid of the cops and have a communication network to gather a huge protesting group at the drop of a hat. I think that the first landlord who attempts a batch of evictions in one of these “stirred up towns” is gonna find themselves met by an unruly mob, and the Sheriffs or whoever may just back off from the grief involved with opposing them. Could add a whole new wrinkle to the dynamics of the rental market.
“There are now thousands of people who are no longer afraid of the cops and have a communication network…”
This is what’s different in these “interesting times.”
Who will do the evicting? Social workers who will be replacing cops. They will soon learn that they need to be packing heat.
Here in Texas, to evict a tenant, you have to take them to court. Guess how long that takes!
There are always plenty of people willing to push people around on behalf of the state. The town I grew up in, the high school bullies grew up to be cops.
During the Great Depression, as soon as the Sheriff’s Deputies left, neighbors would break the new lock and move the evicted tenant’s stuff right back in. People will soon remember these long-disused tactics. Twitter will help spread the word.
Forty years ago I realized that eventually the system would implode, so I moved to the boonies. But now I’m too old and sick to chop wood and haul water, when it comes to that. Oh the Irony!
And so it goes…
And you know for a fact that these are the same people. I gather that dozens of people, probably even more, live in San Francisco.
If you want to get out of it, you have start by staying in.
Well, that should certainly solve the problem.
Confucius say “Man who want out, begin from in”. Confucius very smart.
Wolf, what makes you think that the forbearance and eviction ban will ever end? People already don’t need to work anymore, so why pay the mortgage or rent when the government can pay it for you? The FRB can just buy all the assets and cancel all the debt. They’ve already bailed out everyone else, who’s counting anymore?
“People don’t want to work”
Ahhh the broad brush approach to all of American Society. I can tell you this is false.
I have a friend who lives in SF, smokes weed all day(When not working), and takes every shift he can get his hands on at work since they’ve been severely cut these last few months. But as you said people don’t want to work, so I must’ve imagined him telling me this.
I’ll just respond to this: “People already don’t need to work anymore,…”
I know a shockingly large number of people who lost their jobs, or whose work dried up. Every single one of them would love to work, and they’re eager to get back into it, and they’ll grab the next opportunity.
They tried this in 1917 in russia, didn’t work out well for the tenants.
It’s not clear how much better it would have been under the old regime. The czar’s attempt at a constitutional monarchy was bogus, and odds are the military was going to eliminate him one way or another. People forget how bad it was in Russia before 1917. Remember, we’re talking about Russians, a group noted for getting through some serious horrors, deciding that they had endured enough under the czar.
In NC the legislature just extended the ban on large public utilities from cutting off people’s power for not paying bill for a few more months. Much of that money will never be paid and will be born by people who pay their bill or stock holders who generally hold it for the roughly 4% dividend and earn nearly zero on fixed income.
Municipal utilities were included in the first moratorium on cutting power but some cities were going down the tubes so fast I guess they got exempted from the second round of legislation.
WOW! You summed this up very well.
Briefly adding to what you said…
Yes, some tenants are buying properties and using covid as an excuse to not pay, or in our case, to not have to sign a lease knowing they couldn’t be evicted so stayed on at month to month until the escrow closed and then gave us very short notice they were leaving.
Forbearance was something those of us who survived 2008 know all too well. We managed to save our properties by going through these programs. They are very well oiled due to the 2008 crash so this was an easy thing for them to restart.
My take as a landlord is that you have to now rent to only government types (guaranteed income) students (they leave so don’t need to be evicted), or absolutely bullet proof credit. Every landlord is going to be looking for and luring in those tenants. Fringe properties and landlords are screwed.
We’re all screwed as landlords with the new laws. San Diego just extended it’s no eviction until the end of the year.
One thing you didn’t mention is the gobs and gobs of “free money” to businesses in the form of PPP, city and county grants, PPE grants, SBA loans at very low interest, etc. There’s gobs and gobs of money out there for anyone who can figure out how to navigate the crazy system.
Housing values dropping some places and skyrocketing others is whole other mess that will haunt us when it pops.
Again, nice summary of this mess.
Rental property investors who haven’t bailed in the last few years have not had their eyes open. The demographic shift means that govts everywhere are suddenly becoming concerned about the plight of renters (younger folks) vs property owners. They want their votes. Unless you know some magical way to extend life expectancy another 20 years, this trend will just build and build. Rentals are also an easy target for the govt because there are no issues with complex tax arrangements, profit shifting etc. You just attach the tax to the property and let the owner figure it out.
Fortunately, you’ll notice that the govt has provided a bunch of schemes to help ‘young folks buy a home’, which are really just ‘parachutes for investors’. If you don’t take advantage of these while they’re around and remain a bag holder, well, prepare to be clobbered. Govt’s need more tax, and there is very little sympathy for property investors among the emerging voter base.
Everybody needs a roof over their heads of some sort. I’d just as soon stay in real assets as opposed to take the fiat currency risk posed by this massive money printing or the bubble stock market risk.
I do have concerns over how the renters will be able to afford rents in the future and how stable incomes will be, but if that’s the case I don’t see any safe havens in the other markets either as they are based on consumer income streams too.
Leverage is the devil in the details tho, per usual. Hot money will run in the short term and hopefully the Congress won’t be loading their bailouts onto the taxpayers backs, altho I have my doubts about that.
Maybe I should just become “the bank” and sell to the punters at the top and carry the loan. Might be the best of both worlds there…
I think Nate hit this right on the head. Leverage leverage leverage is more key than the ‘location’ mantra.
I am a landlord. I rent to someone who has a small private pension and the meager Canadian Govt stipend. I give him a deal because he is a good guy. He would die of shame before he would stiff me on rent.
The problem aren’t just the tenants, the problem is leverage and debt servicing….like always. People need some wriggle room in their investment strategies, imho.
My father-in-law did this for years with property. He gave people a break and very seldom got screwed over decades. Sometimes he had to wait for his rent but he always did okay when he sold. He became wealthy along the way just having a few rentals while property values increased. Of course he kept his debt manageable….(none).
“I am a landlord. I rent to someone who has a small private pension and the meager Canadian Govt stipend. I give him a deal because he is a good guy. He would die of shame before he would stiff me on rent.”
Pension, so your tenant is older. That generation paid their obligations. Today’s 20-something will walk away from a lease without batting an eye. I agree, being a landlord has way too much risk these days. Especially in Democrat stronghold cities/states where landlords have virtually no rights or protections.
The idea that poor (young) tenants need protection from rich (old) landlords is possibly from a Walt Disney movie. If shelter is a basic need permitting one group (tenants) to be provided for by another group (landlords) then what about other basic needs eg food and clothing? If government can step in and ban evictions then surely it can also decide who would meet their criteria to take food from the shelves of supermarkets and clothing from the boutiques?
They basically have, they are call rioters.
Just having a little 1848 moment. I expect the rich folk to put their BLM signs away and try to get the toothpaste back in the tube.
I see a lot of BML signs in the front yards of upscale homes in my little village. I don’t think they understand what is about to happen.
No, the idea of tenants needing protection from landlords doesn’t come from a Disney movie. In my case it comes from seeing my parents deal with their landlord of 30 years.
If the government won’t let me evict somebody I bet they’ll be happy to pay for the rent on a Section 8 program or similar.
Tenant screening is the easiest way around the bigger problems, at least so far. It’s also handy to rent to younger folks who have carpentry, painting skills and the like to help maintain the property for rent barter. Guess I’m lucky in that regard – haven’t run into the proverbial millenial freeloader stereotype yet.
I look for win-win sitatuations and again, so far, it has worked out fine.
My upscale professional democratic millennials in Denver have a BLM, Love is Love, Feminism is for everyone, No Human is Illegal, Science is Real, And Be Kind to All, sign in their front yard. Many of their friends feel the same including those that grew up in conservative households. These households make high 100’s and low 200’s. It is to our detriment that we underestimate this educated, influential and large generation as well as the Z’s that followed them. And yes they have been screwed by the Silent Generation and early boomers over the cost of education. But this is their future and they intended to take control of it. We can misjudged them at our peril.
I’m a rentier. I sit on my ass and make money. I can take all the food and clothing I want. If my income looks iffy, the Fed drops interest rates and I’m back in the gold. It’s ridiculous, but it has worked for thirty plus years now. It’s been great for me, but it must suck being a working American. Maybe we need something like the Federal Reserve to make sure the rest of America can grab some food off the shelves and clothing from boutiques.
Rental market is going through huge changes and it is becoming more and more difficult to be a landlord in ca
I am glad to sell my rental last year
I may be able to buy it back in few years for much less
No WE didnt manage to save our property through forbearance in 2008 and in 2020 either, because we didnt need it. What is needed is a return to thrift and wisdom through negative consequences of taking out a loan for something you cannot really afford.
The problem with thrift is that this house of cards is a Pyramid Ponzi scheme with the consumer feeding it. IF people get sanity and went to thrift so that they could insure their own futures, this entire house comes tumbling down.. We the People have painted themselves into a corner with non drying paint and the only way out is to mess up the floor.
It is not the people who stand to lose, it is the banks and corporations. In the past 50 years, debt for consumption has become the norm, and it is the road to poverty, as it has always been. It used to be called buying from the company store.
The people would be much more prosperous if they learned to live within their means, and to only use debt for income producing ventures. Paying for today’s consumption today, with tomorrows income is the road to poverty.
Economicminor… Again, the use of the collective WE. When it goes down, it will impact everyone no doubt, but for people with no debt, who live below their means, multiple income streams including a biz that does well in down times – they are not WE, but when SHTF they will feel it too. The alternative of spending what we don’t have as if over-consumption is out patriotic duty and doing our part, and pretending that there are no consequences for stupidity is a fancy. Next comes a lower standard of living, which IMO is unavoidable, privatization of gov’t services and assets, etc., and perhaps they take us to to war. If you are a reader, checkout The Shock Doctrine from your local library. This is not new including the gov’t response. Ultimately all bailouts flow to the lenders and FED is not gov’t-owned. The UST is being looted. What is really shocking is how quickly it blew-up this time. Peeps were already on the cliff’s edge. One month in and the whining was unbearable.
Jdog, it is always the people who lose.. as all debt is someone else’s income. And I totally agree about living below one’s means. That’s what I’ve done for 50+ years and its worked for me..
QQQBall, you are preaching to the choir. But this looks to me to be sooooo BIG that when it starts falling, We the collective are all going to be crushed. I worry that these guys, the FED and their cohorts and CEOs of the big corps will just end up destroying the dollar.. If they do that in their zest to save themselves, then having income producing assets could be liabilities. The government is going to tax the shit out of anyone who’s still standing. Besides, if the dollar is junk, what’s our income then really worth?
It is said that nothing that you worry about ever happens so I’m not going to lose sleep over it. But I do keep looking over my shoulder.
Sounds like we need an online platform where renters with good credit can post and landlords outbid each other lower and lower to have these renters as their tenants.
Most landlords, especially large property landlords, can’t just lower the rent. If they lower the rent, their bank will call their loan. That’s why you hear about incentives like a month or two rent free, but almost never about a lower rent. The landlords can’t do it.
The banks are in deep too. They can call the loan and foreclose, but then they own a property instead of a loan, and that property is now worth less. How to they deal with their stockholders and upper management with fewer assets to pay dividends and buy back stock?
The government could fix things, but it would have to shaft wealthy, powerful people, the one’s who own the banks. In a free market, the banks would just fail. Under FDR’s old system, anyone with more than $N at a given bank would be SOL, but under the new rules, the government is expected to make good, even on the big bucks, so even the government has its hands tied.
Granted, the government could apply circa 1955 Republican style policy and fix this, but no Americans would stand for such a radical Marxist approach these days.
Kaleberg said: “Granted, the government could apply circa 1955 Republican style policy and fix this, but no Americans would stand for such a radical Marxist approach these days.”
What is circa 1955 Republican style policy? and, Why is it Marxist?
the ongoing contention between those who pay rents and those who receive rents …………
a lot of landlords were bailed out in and since 2008. in the meantime, rents have steadily climbed. a lot of renters have been on the short end of that market manipulation.
The Bob who cried Wolf said: “Forbearance was something those of us who survived 2008 know all too well. We managed to save our properties by going through these programs.”
If welfare was good enough for landlords, it’s hard to argue it’s not good enough for tenants. Hence the rise in support for Modern Monetary Theory among the AOC (Alexandria Occasio Cortez) crowd.
This is the UK, but it’s pretty much the same everywhere in the West.
Debt looks like the solution to every problem when you use an economics that doesn’t consider debt.
The economics of globalisation has always had an Achilles’ heel.
In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
Not considering private debt is the Achilles’ heel of neoclassical economics.
Can you see when the UK started using neoclassical economics?
It’s not hard, don’t overthink it.
As long as interest rates keep falling we can keep loading more debt into the economy.
After 2008, we tried to solve a debt problem with more debt.
We dropped interest rates to the floor, so we could squeeze some more debt into the economy.
We have painted ourselves into a corner.
The economy was just about coping with the private debt load before the coronavirus.
What happens if the economy shrinks with the coronavirus?
The private debt-to-GDP ratio rises.
A sustainable debt load becomes unsustainable.
the bankers have painted US into a corner. Rec. Reading -” The Lost Science of Money” ; Stephen Zarlenga.
You can’t taper a Ponzi Scheme
“No one wants a default. So, extend and pretend rules.”
Avoidance behavior with outcomes that become increasingly unpalatable the longer it continues. And yet it continues!
In 2008 financial global meltdown alot of people stop paying their mortgages for a year, 2 years etc. They lived in the house for that time and still did not pay anything. I don’t see much difference now than before.
It is theses artificially kept down very low interest rates, mortgage rates in this case that is giving a false sense of making borrowers, debt junkies that they actually have much more money then they really have.
The vast majority of people who did not pay ended up losing the properties. They were bought up in large part by people sitting on cash, as lending was very tight. The difference is the numbers of people who are not paying is much higher now, and there are fewer people sitting on large sums of cash. That all adds up to much lower property values at some point in the future…
I haven’t seen any individual such stories. Just statistics. I think it’s just another scheme by financial tricksters to siphon money off the state’s income, or to use the state’s cedit rating to print money and embezzle that. Even if it’s just expressed as an interest rate change or a contract change, that’s what it always boils down to. Professional thieves stealing from the many, the many hard working or retired people that are focused on other things and don’t know what banks and shadow banks are doing behind their backs.
Forbearance is such a strange word. And it sounds too much like forgiveness.
I think deferral or postponement is more informative.
We all know how this ends. The govt bails everyone out. Renters don’t have to pay rent, landlords don’t have to pay their mortgage. Forbearance will be turned into straight up forgiveness. I’m seriously considering going on a forbearance plan myself. If I’m wrong, no harm no foul. If I’m right and I keep paying my mortgage like an idiot, while all my neighbors get a year’s free payments, I’ll feel like an even bigger idiot.
You forgot an important part of the equation. Who pays the interest on the massive debt the government is acquiring? You do know the debt must be serviced right? That amounted to near half a trillion dollars in 2019. The total tax receipts are about 3.8 trillion.
The debt is going way up, and the tax receipts are going way down, but the debt still has to be paid.
That means new sources of revenue. The question is who pays?
“The question is who pays?”
Same as who always pays. Middle and upper middle class suckers, err I mean tax payers. The poor pay no taxes since they don’t make enough. The rich pay no taxes since they have armies of accountants and lawyers to minimize taxes and also pay politicians to write favorable tax codes. So who is left? The guy who owns a plumbing business and makes $300K a year and pays 50% of that to Uncle Sugar. Soon that will be 60%.
That’s why it’s good to emulate the rich with your tax and income strategies.
Don’t forget the tax havens where the multi- nationals hide trillions to sweep in and buy distressed homes and businesses in the deflationary cycle.
After 1929, that number was 90%
Right now the interest rate is around zero. The market has been yelling borrow more for over a decade now. Maybe the problem is that the government hasn’t been listening to market signals.
There’s another long-term trend that’s going to have an affect here – the Millennial voters.
The entire American economic system is set up to take from the young and give to the old. Millennials are saddles with student debt and priced out of the housing market so that boomers get to feel like their house is worth a lot of money.
But within the next 10 years there will be enough boomers dying and Millennials getting into voting that the political system that “had the back” of boomers for 40 years will flip to catering to millennials.
So when boomers own all the property and rent it out but politicians only care about millennial renters, the rules can change very quickly. To the point: I don’t think a single millennial is shedding a single tear from coast to coast when they see some silver-haired dude who owns a dozen properties cry about not getting his rent checks.
That’s the price of hoarding wealth from an entire generation of people in a democracy.
That’s 2010 thinking. It’s 2020 and the oldest millenials are 40 years old, married, kids and yes a mortgage. You’ve made the same mistake the media has made over the past decade when referring to millenials as “young people”. You forget that young people eventually become old people. A lot of millenials are landlords themselves now.
I always find this very thing so amusing. Millennials are running companies now, and people still think of Millennials as kids that can’t figure out what to do with their lives. Time flies!
Another outstanding commentary. Each generation ages, but, with time’s passage (and like old generals) continue to fight their last ‘successful’ war while avoiding serious contemplation of current intel on adjacent generations… (Tuchman’s ‘The March of Folly’, much like her ‘The Proud Tower’, is a very good read, here).
Stay well, and may we all find a better day.
I do mean Millennials BTW not “young people” and I do mean 2020 not 2010.
In 2010 millennials were in their 20s and were not a large-enough voting block. But now milennials are in their 30s which is when cohorts start voting in larger numbers.
Also, milennials do not own homes at the same rate of boomers. The homeownership rate among millennials ages 25 to 34 is 8 percentage points lower than baby boomers and 8.4 percentage points lower than Gen Xers when those generations were in the same age group.
If you study the 250 year history of America, one of the cycles that emerges is that a “favored group” successfully hoards wealth, then the “unfavored groups” get so large that they out-vote the favored group, and finally wealth gets redistributed by the government. I think we’re about at a tipping point for another democratic redistribution over the course of the next 10 years.
“Also, milennials do not own homes at the same rate of boomers.”
Ugh. No kidding they don’t. Because millenials are still on average younger than GenX/boomers. And young people have – AND ALWAYS HAVE HAD – less money than older people.
Come on dude take a few minutes to think this out rather than just parroting BOOMERS R BAD talking points. Also that data you showed is several years old. You’re making my point for me, you’re assuming everyone who is 18-34 today will stay 18-34 forever just like that study that is already obsolete and out of date by several years.
Your data defines millenial as 18-34. That is not applicable in 2020. Millenials are generally defined as those born 1980-1995. Which means the oldest is 40 and the youngest is 25, today. And yet you’re still talking about 18-34 year olds.
And yeah I’ll agree with you. Pick any year you want and 18-34 year olds owned fewer homes than 35-50 year olds or 50-70 year olds. What would be good to see is a comparison of how many 30 or 35 year olds own a home in 2020 vs 1990 vs 1970 for the same age. I’d bet you today’s number is not significantly lower than 1990 or 1970. But you, like most millenials think that at 35 you should have the same things someone who is 45 or 55 or 65 has. Sorry but life doesn’t work like that.
Here’s the best way to own a home: save for it. Then buy one. Just like millions of people do every single year. What won’t help you is whining about boomer this or boomer that. Nobody – boomer or otherwise – is preventing you from buying a home besides you.
Random Guy, if you read A’s comment more closely he did say “when those generations were in the same age group.”
And I only glanced at the study he linked but it compared home ownership of Boomers in 1990 vs GenX in 2000 vs Millennials.
So it appears A’s point does stand that home ownership is trending down for younger generations.
Gen Z they mean. The rest applies.
Millennial age group 26-40 years old
I assume you own nothing, and owe a lot. Boomers had to work for the property they own…it was not given to them, and not yours to take! That is anarchy.
Some things WERE given differently to older folks.
Back in the day, a high-quality state university was affordable with a part-time job. Can’t do that now.
Back in the day, people didn’t have to go bankrupt over an emergency room bill.
Back in the day, saving was rewarded with net positive interest rates, and house prices were only a few times annual median incomes.
Shall we go on?
Back in the day, it was much easier to accumulate wealth (and thus property) because the economic environment was favorable to that.
Today’s environment under-pays most productive people (labor as share of GDP near all time lows) to feed the god of corporate profits (near all-time highs as share of GDP). But stocks aren’t owned equally … and people who are being underpaid can’t invest as much.
The resulting surge in wealth inequality is off the historic charts. Last time wealth inequality was even close to this bad, we got the Great Depression and massive revolutions worldwide.
However, the solution is not to steal from the older folks – who did earn it – the solution is to fix the holes in the system which allow the 0.01% to legally rob the rest of us blind. Unless you’re extremely careful, every transaction you make feeds their wealth at the expense of you and your peers.
It doesn’t matter if they print more money, when 5% of every transaction is siphoned off to the elite as profits, then after 5-10 transactions they already have half the new money. Every time. They’ll keep getting their share while meanwhile the new money inflates YOUR prices, so you have less.
Until corporate power and profitability are reduced, and labor income increased back to sustainable levels, the economic bucket will have holes in it which leaks profits to the elites at every turn.
You Nailed it WS,,,and, once more, to support your point:
My very nice apt in Berzerkeley in 68-70 was $50/month, and I got $5/hour consistently for ”labor only” work through the ”student job office.”
Same exact apt today is $2500/month and what I hear is students are fortunate to get $20.
Doesn’t take a rocket scientist to figure out how unfair that is for those youngsters willing to work hard to put themselves through college, eh?
@VV – doesn’t say much for those that want to apprentice to a trade and save to be able to start a business.
Wisdom Seeker, I think you’ve found it.
it’s socialism, not anarchy.
We boomers had FHA loans, subsidized suburban development, government backed industrial policy, cheap college and a whole host of other goodies. It isn’t about working for stuff. It’s about making sure one got paid well for that work.
Kids nowadays have to work harder than I ever did, and they get bupkes for it.
You know, you THINK you did all the work yourself……But you didn’t.
If we start you out in THIS environment…..there you are sleeping in the streets and begging for coins.
The boomers have kids and they’ll be getting properites through inheritance. I expect the bifurcation of wealth to continue a while yet.
I look at life as a three period game like hockey.
First period is education. Society funds this for 13 years at $5K to $13K per year. If you did well society might fund the next 4 years at a higher cost.
Period number two you put your education to work. You are the one paying into the system with a lot of taxes. If you work hard and do well, you pay a lot.
Period number three you are given some of your tax money back as social security and Medicare. It’s an easier time, but physically you are not able to do what you could earlier.
Correction – in period three we are given a slice of the pay that the currently working kids and adults are earning. Social Security and Medicare are purely inter-generational transfer payments. The ponzi is running out of affluent “investors.”
“Price discovery” is broken at so many levels. It’s like trying to drive on a road where all the warning signs (“Slow! Curve ahead!”) and traffic control (stop signs, traffic lights) have been removed, plus no speedometer. It works fine until it doesn’t.
Think of a rope leading over a cliff, tied to the Federal Reserve building. At the other end of the rope is a platform on which bricks are piled. More and more bricks are being piled on that platform every day, but so far the rope is holding. No one is monitoring how many bricks are on the platform, how much the rope is stretching, or how many are being added daily. All they keep pointing out is that the rope is still holding.
I’m currently reading the book “Collapse” by Jared Diamond. Although it focuses on ecological bases for the sudden demise of societies, I think it also can be extended to our current situation. It makes the point that leadership often makes decisions that benefit themselves personally, in the short term, to the detriment of long-term survival of the society.
In our society today, the goal seems to be to pretend everything is great until we get through the next election.
“Extend and pretend” can’t go on forever. It will end badly, but these things always go on longer than you think they can, but end more suddenly than you can imagine.
‘A dying civilisation can stagger on for longer than you can remain either solvent or sane.’
Those who have died of COVID are actually probably quite fortunate in the timing of their demise.
People do not seem to realize, the Fed can go broke and become insolvent.
It has happened before. There is no free lunch. There is no magic printing press. Debts must either be paid, or defaulted on. Either path involves a degree of pain.
It is the logical scenario- bankruptcies and jubilees
” the FED can go broke” When ?, please enlighten me.
Study the impeachment of the Federal Reserve by Congressman McFadden….. It is one of those things they just do not teach in school…. The confiscation of gold in the great depression, was in fact to recapitalize the Federal Reserve according to McFadden who was chairman of the Congressional Banking Committee and in a position to know. Within two years of filing charges against the Fed, there were 2 assassination attempts on McFadden, and shortly after, he was found dead of “natural causes”.
Bonds which are directly monetized, represent a mark to market liability to the assigned owner until they mature. Monetary base contracted between after 2015 to 20. EFFR was rising. After the crisis MB went from 3.2 to 5.1 and now back down to 4.6. Some concern that in a period of massive MB expansion the thing keeps backing up on them. Liquidity is nearly back to precrisis levels. https://hubertmoolman.wordpress.com/2020/07/29/is-gold-price-action-warning-of-imminent-monetary-collapse-2/ This shows the ratio of gold prices is lower that GFC, while of course the MB was at record highs. The MB is the key to this ratio. If the MB collapses it won’t be because of gold.
Hmm, a quick read on the history of Congressman McFadden says that in 1934, he read into the Congressional Record excerpts from the Protocols of the Elders of Zion…
Try reading his testimony, then you may know something… or not.
It’s the Standard Monetarist Theory now that the Fed brought about the Great Depression by tightening rates at a time when financial liquidity had collapsed because of the stock market crash and debt contagion that wiped out the banks.
Bernanke: “Yes, we did it, and we’re sorry”
So yeah, McFadden was right to blame the Fed, perhaps ahead of his time even.
Expanding that to a World Jewish Conspiracy would be more along the lines of the usual nutso extremist stuff from “Mein Kampf”
The reason the Fed RAISED RATES after the Crash was to cut down on the rampant use of debt to speculate in stocks and do other semi-fraudulent business activity. So they had a point there alright
Because that is what’s been going on in the modern era of easy money ever since Greenspan stepped in to save the stock market in 1987.
So, we’re actually in an era where the Fed’s been doing the OPPOSITE of what happened during McFadden’s time
Is it still the Fed’s fault? Sure, because they control the money supply, and that effects everything about what happens in the economy and stock market.
A few years ago, I wrote a long discussion about how these economic controls work as positive feedback loops, which make the whole system inherently unstable and prone to oscillations with periods of boom and bust.
Finding the right level is really hard, especially when one of the main inputs is political ideology.
It’s something any engineer would understand. The economists at the Fed haven’t figured this out yet.
Back then, the political ideology was fiscal conservatism, which has flipped into its opposite today – de facto MMT.
@Gandalf – check out Youtube for Steve Keen’s work for a systems engineering viewpoint to financial systems. He teaches econ in England and understands PID control loops. He understands Minsky.
I heard a commentary from a luxury realtor in NYC, the realtor says luxury units were built to be safe deposit boxes for Chinese investors, who are no longer buying. The number of these units on the market, exceeds the market and will never be sold at current prices.
Right now the city is housing homeless people in luxury hotels. You can see the demographics of luxury housing in NYC is going to be low income tenants living with great views.
Petunia- correct on the housing market participation from Chinese folks. The same thing happened/is happening on the West Coast. It’s actually a smart strategy. (The origin of the money – you don’t want to know about).
As far as this current event: pandemic + too much financial irresponsibility. I thought something like this would happen, but I could never figure out what. The pandemic is a pretty good spark (+ gasoline) to start the fire. I always was concerned about the federal govt bailing out the mismanaged states: CA, IL, NY, etc. The NYC bankruptcy in the ’70s shows it could happen. This would be totally unethical (bailout of these states), but the political support might be there.
1930: stock market crash, high debt, bank mismanagement, trade disruption, geopolitical problems from WWI, dust bowl, about 1/4-1/8 as much wealth per person as 2020.
History started before I was born. I’ll take 2020 over 1930.
Actually it turned out to be a stupid strategy. With the pandemic and the trade war, the US is probably one of the worst places to be right now for people from China.
Let’s say something bad happens in China right now. My guess is the elites will flee to South East Asia, not here.
Two words: Extradition Treaties
Fleeing to your nation’s strategic rival isn’t necessarily a bad move. Harder for them to come and get you.
Also, the Chinese often own without occupying their safe deposit box housing units.
But it’s an example of how broken the Chinese system is, that such a strategy even makes sense to them, because building a house that isn’t going to be used is fundamentally a waste of resources.
Downtown Vancouver was so full of empty apartments sold to Hong Kongers worried about China that some called it the City of Glass. Last time I was there, there were a lot more curtains. Xi started cracking down on capital exports maybe five years ago. I always wondered if that Foxconn deal in Wisconsin was someone’s exit strategy.
Over the past 30 years I have worked with several Chinese people who came to the US and got Green Cards. Some have become US citizens.
I know a lot of the Chinese families purchased homes near a university so the kids could get degrees and live in the house. If the kids get to stay, it’s mission accomplished. The younger generation has a home, job, etc. and can live the American dream.
I worked with a guy who came over a long time ago. Not sure of the whole situation (often this is kept quiet). Long story short, he got a PhD has a good career and citizenship for himself and family.
He was offered an important supervisory job for a big US corporation back in China and told them he wasn’t interested. He likes the US too much.
I lived in NYC through the bankruptcy. I hardly noticed it in my nice Manhattan neighborhood. But the poor areas of the city were abandoned then, as were the city services that served the poor and working class. It was the era of Fort Apache and graffiti.
Many years ago I had to travel through the South Bronx. It was virtually post-apocalyptic.
The math of state and local pensions can not work under the current circumstances ; it can only “work” if these obligations are taken over by the Federal government
Show us your math…. Then show us where the US Government is given jurisdiction to tax one State to bail out another……
Rcohn – You can fix the math, and if you have the will to do so it isn’t even hard. Pension math works just fine if you don’t let people pad their pensions, restore the retirement age and payout formulas to a sustainable level. Just keep the payout financial load within the tax-harvesting capacity of the local economy and everyone’s gonna be fine except for the grifters who tried to milk the cash cow for more than it had.
jdog: did you see Hamilton? That was the whole “it” in the “Room Where It Happens”. It’s a catchy number.
I think pension fund managers know that there is a very low probability of achieving 7% returns the next 20 years. Some are using riskier strategies to increase the likelyhood that they can hit 7%, but this means additional risk if things go wrong. The difference between 7% return and 4% return is the difference between life and death of pension.
I can’t wait for the news article where they discover a rich dude posing as a homeless man, just to enjoy the rich irony of being housed in a luxury condo unit for free. Wasn’t there a Conan Doyle story on a rich guy posing as a beggar, just because it afforded him amusement? Or was that Sherlock in disguise, working on a case?
I’ve known some really rich guys. The richer they are the more they blend into the woodwork. It’s with the wives that you see it.
With the wives and with lottery winners. Same difference.
Petunia and Wisdom Seeker – the Chinese also bought because they thought their units would increase in price. They were looking for capital appreciation.
Look at every city the Chinese went heavily into. Prices skyrocketed. They weren’t just buying one unit. They were buying 10 and 20 units. And because some of them were laundering money (with the help of Chinese realtors and lawyers), they were bidding way over asking (good way to get rid of dirty money fast). The local natives had to bid against this.
They were also buying pre-sales and then flipping them for a higher price before the building was completed, paying no tax on the money they gained. It was a licence to print money!
I listened to an economics blogger who had a good friend in China. He said that in 2016 (if my memory is correct) the small and medium manufacturers in China were just not making any money, so they decided to go West and speculate in the real estate markets. I’ve even heard rumors that the CPP encouraged this. Maybe they were involved too? It doesn’t take too many of them, each buying 10 to 20 units, to force prices skyward.
I realize you are talking about the luxury apartments and, yes, some of those units probably were purchased as safety deposit boxes, but there was also a whole lot of speculation going on too in order to gain capital appreciation.
What was actually going on was that when Xi became president in 2012, he went on an anti-corruption campaign. Lots of Chinese billionaires and officials were rounded up and imprisoned, and a few were executed.
That ignited the flurry of activity from the wealthy elite in China to offshore their money in all sorts of safe deposits, including real estate. Time to get the heck out of Dodge.
The anti-corruption campaign was of course not really about corruption, just Xi’s way to get rid of his enemies and make sure that the billionaires that remained got rich because of him and his cronies.
With the centralized gatekeeper economy controlled by CCP cadres, nothing in China happens without a bribe or large “gifts”.
One of the purposes of the 10 year term limits on the President of China was to make sure that fresh blood could be recycled into this system every 10 years, so that whole new sets of CCP cadres could get rich off of this gatekeeper system, not just the same old people and their families.
The term limits are gone now, of course, and Xi will try to be President for life
And then of course in late 2016, China started imposing a series of ever more severe restrictions on capital outflow from China.
That’s the REAL reason the rich Chinese have stopped buying overseas. They can’t get their money out
I always thought this might happen. Economists say when you run a deficit the dollars are no good unless they finally end up back in the US. That means buying US products, treasuries, financial assets or real estate.
“Right now the city is housing homeless people in luxury hotels. You can see the demographics of luxury housing in NYC is going to be low income tenants living with great views.”
That’s just copyright infringement, this is supposed to be an exclusively CA and SF idea, the SF DA and CA AG need to initiate litigation immediately against NYC for stealing their idea of housing homeless in hotels. We in CA even have a cool name for it: “Project Roomkey,” are those A**holes in NYC going to steal that too. Shameless. we want royalty rights and a licensing fee from NYC.
I just sold our 1965 1100 sq ft bi-level house in Regina, Saskatchewan. Deal closed yesterday for $185K.
My meth addicted 38 yr old son, wife and family lived there rent promised for 11 months and were about to be evicted/have utilities cutoff when covid hit.
Had a hellova time getting my son and his gaggle of addicts out of the house, accepted $35K less than last yrs offer and spent 70 hrs hauling out 7 half ton truck loads of garbage off the property but the feeling is that of having dodged a bullet.
Heck of a story. Tough, tough, tough.
Glad it’s behind you, though.
Does anyone understand what Tommy runner has to say?
I am totally confused by the financial markets and economy but that beats it.
That is really sad and you know that there is absolutely nothing you can do for your son.
Must be a relief to know you can cut yourself off from him and his gaggle of addicts.
My dad was religious. Me not so much but evil exists in many forms and once it grabs hold, you better let go because what you hold dear, isn’t dear to the devil.
Meth got my boy and I tried everything sixty-three years of problem solving taught me to save him. Alas, meth can stay up three days straight, me two…
Sorry to hear about this Barry. Good luck to you and the others hurt over this in the family. I went through about the same with a daughter years ago, but she died before too many years of it. I’ll never be the same.
Eventually that’s what you have to do. But – a close friend’s son spent 10-15 years in/out of rehabs. Drove us all crazy. With non-family help he turned himself around at 41 and has been clean and working for 4 years straight.
Interesting conversation. Reminds me of a trip to Ireland on business in the early 90s. Had a driver take me an hour north of Dublin. Got a complete history and explanation of what and how “the Dole” works or doesn’t. Sounding very familiar to much of what is transpiring right now ??
Can we finally put politicians and bankers in jail?
Making laws and jailing and fining people without these same laws applied to themselves. Fining bankers that create money did not work.
Sorry, but the law and force of the state is only to be used against the little people. Good God, man, have you no compassion for the beleaguered politicians and bankers?
Need to add a dozen more beers and then things will be alright…
gosh that’s a clever rejoinder. I’ll bet you thought it up all on your own, too, without any help from your babysitter, either!
“… all heck has broken loose in their lives” Well, I guess that’s not quite as bad as all hell breaking loose. Or maybe you’re just trying to save my oh-so-tender ears.
Drug counselor lamenting the rise in addict deaths. The clinics have had to shut down, people who receive treatments miss appointments. They are locked at home and the government sends them money. What do you think they do? Buy illegal drugs, overdose and die. Ultimate version of shop till you drop.
“Nobody Knows How to Ever Get Out of This Mess”
That’s because for some problems there simply ARE no solutions.
Actually, there is a way, but it’s not feasible because TPTB would never go along with it. They won’t give up any of their power and privilege even to save themselves.
Huis clos: no exit.
Agreed! There are solutions, always have been, it’s just that people aren’t disciplined, desperate or civic-minded enough yet to accept the personal impacts that any solution requires.
We have a serious infection on an open wound, but we are not willing to face the pain of ripping off the bandage to treat it.
Both courses involve pain, sooner or later, the later course usually involves severe sickness and possibly death…
I think it’s gangrene, not an infection.
Una-a pleasure to see your handle, again. Am guessing, in a world with humanity in massive surplus to its own requirements, and a natural resource base collapsing under that surplus, your absence reflects Cassandra’s futility and fate. (…or, in Heinlein’s words: “…of course, the game is rigged. But if you don’t bet, you can’t win…”).
A better day to all.
Glad, very glad to see you on here again Una!!
Gotta ”keep on keeping on”,,, and I understand the challenges of doing so in spite of sometimes you especially posting so sublimely that very few, if any understand the depth of your comment.. (admitting I, similarly, do not always ”get” what you say, but I keep trying and ”appreciate you”)
Thank you, and welcome back.
Welcome back, Unamused. There was quite a bit of discussion here as to what happened to you after you disappeared. Cheers!!
what knowledge have you brought back to us? i know we’ll have to wait… tease it out… we’ve got nada but tiiiiime. / so glad you’re back! you’re only back because you KNOW something…
I agree. The ‘wave’ will happen about 3 months from now. It takes a bit to process evictions (at least in Calif). Many landlords have held off on processing evictions as they don’t want to lose tenants in a climate of possible empty units due to massive unemployment. And probably there is a certain percent that were able to pay their rent with the unemployment boost which now is….., Well I give it three months.
Simon Johnson did a one page breakdownback in 2005 of how the …, well…, ‘breakdown’ would happen.
TPTB will continually fight to maintain control becoming more and more egregious with their machinations until it all collapses. Unfortunately that level of collapse involved a lot of smoldering ruins and ash.
No problem for a while.
The Central Banks can keep printing.
Currency valuation will not fall if the Central banks co-ordinate the printing.
Governments can increase their deficits/debts paying out state benefits ensuring they get re-elected as possible candidates will get voted in if they suggest cutting the state benefits.
Government has no option but to pay out benefits if it does not want civil unrest.
I meant will not get re-elected if they suggest reducing state benefits.
And more and more people are dependent on state benefits.
In the UK; 65% of families are receiving state aid of some kind and that will increase.
Some people on unemployment admitted they were not looking for work. Florida set another record for daily deaths. At my mom’s nursing home they have a courtyard visitation area. Mom was in a wheel chair with a fan beside her blowing the visitor’s air away from her. A restaurant parking lot was full for lunch. A barbershop parking area was empty. Near the hospital medical office buildings area I saw a sign, “CNA’s $15/hr.” The Walmart parking lot was as full as I have seen it in recent times. They require face masks. A sign in the entrance way read, “Help Wanted.” They have aisle floors marked with signs for one way traffic. A few people wandered the wrong way.
There are a couple of thing that we can be fairly sure will happen. One is that the ownership of a lot of property, both residential, and commercial will change hands over the next 5 years. The other is that the government will need new sources of revenue to pay additional interest on the debt they are accumulating.
I read recently that some members of Congress are purposing a “wealth tax” in which they would tax Americans on their acquired wealth. That is a really scary thought.
At the point where government taxes both your income and acquired wealth, you are definitely not a free Citizen, or living in a free country… but then perhaps that was the plan all along.
I see the only solution for the government to balance the books is a wealth (capital) tax.
In the future the government is going to get so much income tax as there will be less jobs and companies will therefore be able to pay close to minimum wages resulting in little income tax deductions.
Switzerland has a Capital Tax.
Everyone has to complete a tax return with their income and a kind of personal balance sheet.
Then you pay about 0.2% tax on the net capital you have declared on the balance sheet.
The courts also have access to this information when you have a court judgment for a debt or are being fined for a motoring offense as the fine is based on your income.
Switzerland is not a free country. It’s people are subjects, not Citizens.
If you want to trade your freedom for socialism and ruled by tyrants, then you never deserved to be a free Citizen to begin with.
The US used to be the only truly free country in the world, but its people now do not even value liberty, or sovereignty. It is a truly sad time indeed….
“The US used to be the only truly free country…”
Not sure what you mean by “free country,” but the people were never that free. It started out with white male landowners being relatively free, while they owned slaves, who by definition weren’t free. And even those privileged landowners’ wives weren’t allowed to vote. In my lifetime, when I was a kid, in many states, I would not have been free to marry the woman I ended up marrying (different race). A 1967 Supreme Court ruling provided that freedom across the US. Etc. etc. So I don’t really follow your argument. “Freedom” was only for some people in the past.
That is a ridiculous statement and viewpoint.
I remember when we fled the US in ’68. I was 12. My Dad (US army vet….major) gave us kids strict instructions not let anyone know we were actually leaving the Country. We were supposed to simply say we were moving to the Pacific Northwest. At that time any dissenters to the Viet Nam war were often investigated and harassed by the IRS. The FBI infiltrated anti-war groups and who can forget the young lady’s anguished face holding her dead school mate at Kent State? It made the cover of Life Magazine.
We valued liberty which is why we left for Canada, my mother’s birthplace. My older brothers were slated for the Draft and my folks didn’t want them killed for bogus anti-commie reasons. Remember the domino theory? Now, Viet Nam is the newest great best friend and happily makes runners and other shoe products for US consumers.
You what I really valued in Canada? No more Pledge of Allegiance every morning. Instead, each day was started with a Bible reading in public schools, then announcements. My brothers valued the ‘no more’, “Remember, if you are turning 18 today please ensure to register for the Draft within 2 weeks”
I mean Citizens were Soverign, not everyone was a Citizen, and yes they had slavery, but slavery had existed for 10,000 years before that. It was not invented by the US.
The point is if you read your history, you would learn that the USA was the first and only country in the world where the majority of the people were sovereign, meaning they owned themselves. NO other country up to that time had Sovereign Citizens. And none do today. All the people were the property of the King, and the King was the only sovereign.
Kings were the only people who could “own” property, and everyone else was granted use of the Kings property. When the King of England signed over his land holding in the US, he signed them over to the people of, and not the government of the US.
The US was not perfect, nothing is, but it was the first and only place where freedom for non Kings existed. Today most of that freedom has been illegally usurped by the government because the people would not stand up for it. But I assure you, the taking of freedom is not over, not by a long shot.
Private property is a government service. Property isn’t some mystical thing that just happens. It takes laws, police forces, prisons, courts and all soorts of other stuff to make private property. The more property, the more of the service you are using. You should pay taxes on it. Maybe if the government just covered the first million dollars under criminal and civil law people would get that. Get robbed or defrauded, still have a million left, tough. Sue someone, the government will get you up to a million.
Private property is theft.
And profits are theft most foul.
Also private companies and their C suite types DO NOT create jobs. Customers do that.
If you get a haircut for $20 and your barber makes a $10 profit after expenses, is that ok? It’s his private clippers that he is using. If you want to get your haircut inside, someone has to stake up the money for the building.
Lordy no! Heavens everyone with wealth over $1 billion should pay a wealth tax. Such a scary thought!
The income tax started as “only a tax on the rich” also. Democrats use the “rich” as a scapegoat to sneak illegal legislation through and then expand it to include the masses. It is a practice called incrementalism. Before you sacrifice ethics and morals based on wealth, see if you want that same tax put upon you, because it is going to happen in due time… Stealing by force, is stealing by force no matter who you are doing it to…
I find taking out the billionaires financially totally attractive.
They can always get off their behinds and make more.
Everyone knows wealth makes you lazy.
If you’re going to have a wealth tax, you’re going to have to define and measure “wealth” in an objective way. Easy enough for the wealth of you or me, but the really wealthy have all kinds of trusts and other devices to obscure their assets. Great book to read on this subject is “Capital Without Borders…” by Brooke Harrington. Quite readable, or you could just find reviews and interviews all over the ‘net.
My recollection, and I can’t find a source right now, is that several European countries have enacted, then abandoned a wealth tax because they found it unworkable.
What is this haircut you speak of ?
Straw man argument.
The proverbial road to inflation is always paved with “good” intentions.
We already have high inflation. Have you tried to buy a share of a company, a piece of real estate or an old master painting lately? We have massive things-rich-people-buy inflation, because the only people with rising incomes are already very rich.
You are probably referring to working people inflation in which working people have to pay higher prices but can also get paid higher wages. That kind of inflation is just the market signalling growth and the need for resource allocation. Rich people are terrified of it for some reason, but if you work for a living you barely notice it.
Asset bubbles have been the new inflation but it’s gentrifying the American Dream out of reach of half the population.
Weaponizing inflation this way turns the 99% into wage slaves (more) which keeps em busy and not making trouble for their ‘masters’, until this pandemic issue anyway. Now they’ve got lots of time and a little bit of money to get by on so off go the fireworks.
Offshoring manufacturing and importing labor grew corporate profits from roughly 5% of sales to 10% of sales which is toward the max range. This also at least doubled sp500 values as price to sales is at record high. This will most likely mean revert to labor getting a bigger share as politics will demand more protection s for labor. There is close inverse relationship between labor costs and corporate profits.
Seems to me that the Chinese win no matter what. Why not just try building a better world with them? The current antics just aren’t working.
It is impossible for a service based economy to compete with a manufacturing economy in something like a cold war. Unless the US rebuilds its manufacturing base we cannot compete. The problem is the US is run by corporations, and corporation make their money from globalism. The corporation also own the government outright. We are collapsing from our corruption and our lack of morals and ethics. We are so greedy, we cannot even do what is in our own best interests any more.
When only 18% of people approve of what the government is doing, it is clear we are already living under tyranny.
The real problem with massive asset inflation is that it robs the young who are just starting out in their careers of the opportunity to buy assets at reasonable prices. They just are forced to buy overpriced assets and hope that the “greater fools” theory continues.
The governor of Oregon hitched the entire eviction moratorium to the County Sheriff’s office by blocking the Sheriff from executing on judgments obtained by landlords in circuit court. So, while circuit courts in all counties are accepting and adjudicating evictions, including accepting the accompanying filing fees, the judgment hits a brick wall when it lands on the Sheriff’s desk awaiting Writ of Execution. Right now, the Sheriff’s offices in the highest populated counties (Clackamas, Multnomah, Washington counties) are about six months to a year behind in executing writs. So even if a tenant received a notice of judgment today for non payment of rent, the Sheriff may not get to enforce it until after Christmas. That is if the moratorium is lifted on Sept 30 and not extended another 12 weeks.
So the problem is that the governor is trying NOT to interfere with the economy by having the sheriff evict people. That’s not how government is supposed to work.
And there will be no huge wave of homeless families hitting the streets when the moratorium is lifted, however, those with judgments against them are living on borrowed time. Since the cases have already been adjudicated, and entries of judgment made, the Sheriff’s Office will eventually enforce with writ of execution. The back up is about a year.
I agree. The ‘wave’ will happen about 3 months from now. It takes a bit to process evictions (at least in Calif). Many landlords have held off on processing evictions as they don’t want to lose tenants in a climate of possible empty units due to massive unemployment. And probably there is a certain percent that were able to pay their rent with the unemployment boost which now is….., Well I give it three months.
I’ve been thinking about your headline… nobody knows how to get out of this mess. Well, it is true that no one knows how to handle this current death spiral. But if one takes the word literally, there are ways to get out. The destinations include relatively peaceful countries such as Australia, New Zeland, Canada, the only downside for the first two is you have to drive on the other side of the road.
One other method, buy your way out of this mess. I know, this isn’t one of Wolf’s regular real estate blogs; but I saw this nugget float across my email:
$100K PRICE REDUCTION! & 3.5% COMMISSION!
1 Year PAID HOA DUES!
1450 Franklin St, Unit 402
2 BD | 2 BA | 1,320 SF | $1,599,000
I guess someone is rushing to get out.
There is even a Klatch Coffee downstairs.
What city is this?
MCH seems to be a San Franciscan from his posts.
The street address is a San Francisco address (though I’m sure there are some other Franklin Streets around the US with these types of numbers).
It’s a condo there, and someone seem very ready to unload this thing.
3.5% commissions and a year of HOA; the HOA for the place seem to be about $960. So, someone is dropping an additional $33K to off load this bad boy. (assuming a base commission of 5%)
Just for fun, I looked up the build year… 2017, pretty new, and was sold for just under $1.5M around then.
Are we getting to the return-of-capital vs return-on-capital stage?
I used to eat out daily. I haven’t done that since March. So Most restaurants are gone soon.
Airlines? I wonder about the pilots. They are basically blue collared bus drivers paid well like white collar employees. Do those skills transfer to high paid management consultant jobs when they lose their jobs? No. They will be driving ubers.
The job loss impacts of this will be increasing for years. And moving into different industries. Much foreclosure and evictions in the future.
imagine if the air industry attempts to recover..
Retrain and find pilots and mechanics? Imagine the complications and hurdles.
The mess; the answer.
Technology is deflationary. Developed countries have had low inflation for two decades, driven by technology implementation. But the new kid in town, something all the members of the Giant 5 Index are chasing hard, is Artificial Intelligence.
Elon fears the monster within AI, However it is the potential of a fully digitized, globally networked AI system to produce massive deflation that we should fear.
If you think it is way in the future read the KPMG new report, AI transforming the enterprise,where interviews of Fortune 500 executives show how fast AI is moving.
This opens the door to Modern Monetary Theory. No inflation. No problem. Our government can open the spigots, Cold, hard cash will flush this mess away. And inflation will not force the ghost of Paul V., to our rescue, because AI will keep it in check.
Everything I expected to happen with this ccp lock down has been wrong.
28+yrs self employed, thought I had some sort of feel for business climate.
Great housing depression, and prior recession….nailed it.
This time around? Complete swing and a miss. Very few sites left that I visit on the world wide. Love the articles here, and the comment section.
But sometimes it takes a few old fashions & a friday fish fry at the tavern, to stand back and get a different perspective. I do not believe I’m wrong on what the $$$ impact of this forced shutdown will be, I just underestimated the yearning for freedom.
I agree. The ‘wave’ will happen about 3 months from now. It takes a bit to process evictions (at least in Calif). Many landlords have held off on processing evictions as they don’t want to lose tenants in a climate of possible empty units due to massive unemployment. And probably there is a certain percent that were able to pay their rent with the unemployment boost which now is….., Well I give it three months.
Are landlords eligible for some kind of support similar to PPP?
“Van down by the river” “SJ aka digital Detroit” “Unamused” and “Not amused”
Monopsonies are a direct outcome of an unregulated, global economic system, where a small number of multi-national companies and persons dominate, but even that arrangement will eventually run up against the limits of global resources. Amazon and big box stores like Walmart strip cost out of the supply chain and labor, driven by dominance and volume in the marketplace. In Western economic systems they are heavily subsidized through the public funding of massive aspects of our transportation infrastructure, the low (and subsidized) cost of fuel, minimum wages that are substantially less than a living wage, and many other advantages (including small towns desperate for a Walmart on the outskirts). While some (Amazon) promise to double their minimum wage (e.g. Amazon in November), let’s see if that will still be a priority due to the job losses and downturns in the economy.
These conditions are not accidents. We voted for our politicians, and our economic system is a direct result of our cultural values. The endless moralizing about the $600/wk of unemployment benefits is cultural. A retail footprint 20x that of Europe is not an accident, nor was it the result of some grand conspiracy. Nobody planned this, it is who we are, and what we have nurtured. We will not change it, without massive external and internal forces (including strong leaders, but not necessarily) acting on our system and our values.