Government-imposed prices for real estate

[Agathon]

Welcome back to the 70s, folks. Apparently, Obama is going to announce a housing plan with a stated goal of setting real estate prices above market prices. This despite the fact that market prices are still at unsustainable levels and need to fall.

Markets have already failed. You lost, and you and your cohorts can do no finer service to humanity than STFU.

If I were you, I'd stop whining like a biatch and start looking for somewhere to hide before Obama's commissars turn up at your house for a spot of ideological "purification".

[Saras]

Markets have already failed. You lost, and you and your cohorts can do no finer service to humanity than STFU.

If I were you, I'd stop whining like a biatch and start looking for somewhere to hide before Obama's commissars turn up at your house for a spot of ideological "purification".

Right, a heavily regulated and micromanaged sector went where it was intended (encourage Americans to own homes no matter how bad an idea it is for some people) and supposed to (bubbly, then bam!), and yet somehow "the markets failed".

Go jerk off to Naomi Klein fantasies.

[snoopy369]

To be fair, Saras, removing some of the regulations was part of what got us here in the first place. Not all of it by any means, but part of it. The combination of (bad regulations) and (removing good regulations) worked in concert.

It's like cancer... you have to have several things fail at once for things to go to ****.

[notyoueither]

Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter.

Did it not recently come out that the US economy was in recession, meaning negatives, for all of 2008?

How then could GDP grow?

[Berzerker]

and when it fails the left will blame the free market

[Saras]

To be fair, Saras, removing some of the regulations was part of what got us here in the first place. Not all of it by any means, but part of it. The combination of (bad regulations) and (removing good regulations) worked in concert.

It's like cancer... you have to have several things fail at once for things to go to ****.

It's not just regulation/lack thereof. It also has to do with the recent American "prices of assets always go, or should be legislated to go, up" brand of "capitalism", bad math at hedge fund desks, proptrading desks and, worst of all, ratings agencies, too much easy money from the fed over the last 10 years (I did dare venture ), etc etc.

[Arrian]

I don't think it's yet clear what they're going to do. I do agree that trying to prop up real estate prices via the government is a bad idea.

-Arrian

[Zkribbler]

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

Remember, we have to about double out unemployment numbers because of the huge increase in the number of prisioners we've added since the '80s. Normally, these people would be counted as unemployed, but since they can't look for work, they don't appear on our rolls. But they're not working but instead are living of the sweat of those of us who are.

[Victor Galis]

and when it fails the left will blame the free market

And the right will blame the government.

What's your point?

[Victor Galis]

It's not just regulation/lack thereof. It also has to do with the recent American "prices of assets always go, or should be legislated to go, up" brand of "capitalism", bad math at hedge fund desks, proptrading desks and, worst of all, ratings agencies, too much easy money from the fed over the last 10 years (I did dare venture ), etc etc.

In his latest book, Niall Fergusson suggested a strategy that went something like this (let's see if I remember it):

Step 1: Get a bunch of investors' capital and buy government bonds.
Step 2: Use bonds as collateral to sell options protecting against an improbable collapse in the market.
Step 3: Repeat Step 1 with the money you got from sale of options (every repetition will be much smaller than the previous).
Step 4: If the market doesn't crash... make a hefty profit.

Do this every year until the market crashes collecting large bonuses along the way. When the market crashes, laugh at the poor fools that invested their money with you.

[Saras]

In his latest book, Niall Fergusson suggested a strategy that went something like this (let's see if I remember it):

Step 1: Get a bunch of investors' capital and buy government bonds.
Step 2: Use bonds as collateral to sell options protecting against an improbable collapse in the market.
Step 3: Repeat Step 1 with the money you got from sale of options (every repetition will be much smaller than the previous).
Step 4: If the market doesn't crash... make a hefty profit.

Do this every year until the market crashes collecting large bonuses along the way. When the market crashes, laugh at the poor fools that invested their money with you.

Yea, that's the "hiding the long tails" strategy N.N. Taleb has two books out dealing quite fiercely with the subject.

Still, existence of gullible fools with money does not mean the "markets have failed".

[Saras]

A good piece on regulation:

http://epicureandealmaker.blogspot.com/2009/02/to-catch-thief.html

The juicer bits:

Many observers of the smoking wreckage which now passes for our banking system have opined that, in addition to being hobbled by a fragmented regulatory system riddled with overlapping and ill-defined responsibilities, the regulators who were supposed to be watching the chicken coop were woefully overmatched by the foxes. Staffed primarily by lawyers, on government pay scales, the SEC almost by definition is not up to the task of monitoring Goldman Sachs, JPMorgan, or anyone else, if by "monitoring" we should expect true informed oversight and control. If Harry Markopolos couldn't get the SEC Enforcement Division to understand and investigate what appears to have been a particularly simple—if breathtakingly successful—Ponzi scheme, how can we possibly get comfortable that our government watchdogs can effectively oversee the hugely complicated, mind-numbingly sophisticated, globally distributed trading operations of a modern investment bank?

This shortfall in regulatory intellect has been exacerbated by what the Japanese call amakudari, or "descent from heaven": from time immemorial, a steady stream of former regulators has resigned their posts to assume positions on Wall Street, sometimes at the very firms they had been charged with overseeing. There is very little incentive to push a little harder or dig a little deeper into a question if it irritates a powerful firm that might be your future employer. Furthermore, this practice provides a steady stream of inside knowledge on current regulatory focus, practice, and ignorance that is of tremendous value to oversight-minimizing investment banks.

The answer, of course, is obvious, if politically difficult to put into effect. Staff the SEC, or whatever "Super Regulator" the government decides to deputize to oversee this mess, with a bunch of highly-paid, tough-as-nails, sonofa***** investment bankers. You will have to pay them millions, just like regular bankers. (You can tie their incentive pay to improvements in the value of securities held under TARP and TALF, if you like.) Pay them well, and investment bankers won't be able to treat them like second-class citizens at the negotiating table. Pay them like bankers, and your regulators won't hesitate to read Jamie Dimon or Lloyd Blankfein the riot act, because they won't give a **** about getting a job from them later.

Trust me, these are the kind of people you will need on your team: highly educated, financially sophisticated, psychotically hard-working, experienced professionals who know or can figure out CDOs, SIVs, balance sheet leverage, and credit default derivatives just as easily as the idiots who created and trade this ****. Leading your enforcement and supervision teams you need a bunch of smooth, smart, plausible, grandiosely self-confident senior bankers who will not hesitate to tell Vikram Pandit to go **** himself, his mother, and the cow she rode in on if he ever tries to **** with the United States government, the US taxpayer, or the pizza delivery boy again. You know: psychopaths.

This is not a new idea. For yonks, the Brits have known that the best person to hire as gamekeeper on your ancestral estate is a former poacher, someone who knows what they know, how they think, and where to punch them in the genitals to get maximum negotiating effect.

[Arrian]

Imagine, if you will, what the Republicans would say about paying regulators millions of dollars.

-Arrian

[Kuciwalker]

That it's a good idea? There are plenty that think it's a bad thing we underpay govt workers.

[Naked Gents Rut]

The problem with government is that they try to treat everyone equally and pay everyone on the same scale (more or less). Why should someone working for the Post Office get paid the same amount as their peer at the SEC?