The Economy

It wasn't normal, though. They didn't allow all of the bed debt they were responsible for from before the financial crisis default. Instead, they came up with a scheme to create money out of thin air and use it to buy treasury bonds and mortgage-backed securities, in order to suppress interest rates (and stave off the defaults).

The thing is, those interest rates are the price of money. ... so they have been making money artificially too cheap. That, in turn, changes how people value that money, and in the case of home prices, it drove prices up. Which is what you have been seeing. This is the Fed's balance sheet just with regard to the mortgage-backed securities it has been buying.




The first sign of trouble now -- like in 2020 -- their default is to step in with more hijacking of the debt markets; more money created out of thin air and more bond buying -- short-term "fixes" that create massive long-term issues.

Economically, people are paying for it in a multitude of ways from the broad-based consumer price inflation they unleashed with the insanity response to Covid (monetizing an insane amount of govnerment spending -- 2020 to 2022 on the graph), to runaway asset prices since they began this stupidity after the financial crisis -- which includes home prices and has made it so that the younger generations are now priced out.

We are reeping what we sowed. On top of it, the debt levels they have created with this "policy" make the overall economy way more vulnerable to a debt bomb exploding if (really, it is when) their ability to frantically keep their thumb on the scales of finance runs out.

 

What I was talking about isn't a "Raguville" thing -- although I get it, I post, you try to reflexively insult me. Home ownership in Switzerland is the lowest in the west, and in fact, there was a story in the NY Times a few months ago saying the rental culture there might offer a glimpse of the "post-ownership society" the U.S. is heading toward because of affordability.

In This Country, Most People Rent for Life. Is That Really What They Want?

What you were trying to say just isn't true. It isn't an "available land" thing. Switzerland has limited buildable land because it is so mountainous. The story actually comments on that.

In the United States and many other countries, homeownership is encouraged by the government and generally considered a rite of passage. In Switzerland, where the terrain is 70 percent mountains and expensive real estate on limited buildable land has been the reality for generations, a lifetime of renting is not considered a personal failure or a shortcoming of the system.

The "lifetime of renting is not considered a personal failure or shortcoming of the system" is precisely what I was posting about.

 

Not sure where you are getting "thrift is a virtue" from.

Someone else brought up France saying that there is a renter's culture there. ... I spend a lot of time in France, and my understanding was that home ownership rates in France aren't very different than they are in the U.S.

What I was saying was, "If you want a renter culture, look at Switzerland."

I then talked about the different attitudes between the U.S. and Switzerland with regard to home ownership. In the U.S. politicians have spent the last century selling this notion that home ownership is a virtue of some sort, and as a coutry we have done a lot of things fiscally and monetarily to subsidize home ownership, which in turn has hurt the broad population in ways I can fill up a message board with.

In Switzerland, they haven't done that, and in fact, they don't see it as some kind of national failing. I also pointed out that despite the fact that most people rent their homes there, the country as a whole produces way more than the U.S. on a per capita basis. It's not like that "renter's culture" is indicative of a poor country. The people there are wealthier than they are in the U.S.

That wasn't the "thrift is a virtue" you took from that. It was exactly what I said.There is no inherent virtue in owning a home. Obviously, if you can afford one, it's a significant asset so who wouldn't want to own one? But 1) At the end of the day, from a practical standpoint a dwelling is a roof over your head, something accomplished by renting, and 2) It's certainly not worth artificially creating all of the unitended consequences that have hurt people way worse than it has helped in this country by coming up with nationwide schemes to try to subsidize home ownership for people.

 

I don't know if anyone has been paying attention to the circle jerk at Davos this year (Evem if you don't care, it's still fun googling up some of the stories about all of the local brothels being booked up).

But this may be the best speech I have ever seen at Davos. The U.S. could use a president like Javier Milei instead of the clowns we're settling for.