Sunday, October 7, 2012

Real Home Equity per Capita (Musical Tribute)


Click to enlarge.

Welcome to 1979.



Source Data:
St. Louis Fed: Real Home Equity per Capita

11 comments:

Stagflationary Mark said...

That's 33 years of nothing. Sigh.

Troy said...

my parents had nothing in 1979, they started paying down the mortgage soon after. Paid it off 5 years ago now. Mortgage was cheaper than renting (they got most of the +70% housing inflation of the 1980s so I guess it was never wasted money.

Equity is actually a very squirelly concept -- millions of Casey Serins borrowing $3T+ in 2005-2006, boosted home values and giving every homeowner $100,000 in phantom equity . . .

The reality of our fiscal dilemma centers on two unfortunate facts -- we've deferring taxes like crazy, and we've borrowed $10T+ against past & present home valuations.

Here's the graph:

http://research.stlouisfed.org/fred2/graph/?g=bz7

blue line is mortgage debt
red line is gov't + household debt (less mortg debt)

So we've capped our mortgage debt at $10T while boosting our systemic debt from ~$10T in 2002 to $20T+ now.

If and when we start bending that red curve down again, home values just have to take it in the pants.

well, that's my thesis and I'm sticking to it : )

That red line doesn't even count the $4T+ intra-government debt that doesn't officially exist apparently. $2.7T of that is the SSTF, and that should be paid down to $1T by 2030, that's $100B/yr right there of deferred tax liability.

If I were sane I'd stop by Big 5 Sports, buy a kayak and stores, drive straight to the coast, and start paddling west!

Troy said...

heh, ol' Bucky was a wacky dude but he saw the problem back in 1981:

http://www.american-buddha.com/Critical%20Path%20pic%204.jpg

offshoring trend since 1950, ever-expanding mortgage debt, central role of DOD spending in recirculating money into the economy -- Fuller is doing a decent tour d'horizon in "Legally Piggily".

He even introduces the 1% meme:

"In one way the U.S.A. and U.S.S.R. citizens are in much the same socioeconomic position. The Communist party which runs the U.S.S.R. consists of about 1 percent of their total population, while the U.S.A. is controlled by about the same 1 percent, who are the LAWCAP strategists of the great U.S.A. corporations.

"The U.S.A. is not run by its would-be "democratic" government. All the latter can do is try to adjust to the initiatives already taken by LAWCAP's great corporations. Nothing could be more pathetic than the role that has to be played by the President of the United States, whose power is approximately zero. Nevertheless, the news media and most over-thirty-years-of-age U.S.A. citizens carry on as if the president had supreme power. All that he and the Congress can do is adjust to what the "free-enterprise system" has already done. They are riding on the snapping end of the power-structure dragon's tail."

Preach it, Brother Bucky!

Troy said...

http://i.imgur.com/ph20B.png

This is from the 2010 European Mortgage Federation "Hypostate" and is mortgage debt / GDP

The Iceland reporting line is . . . troubling, as if a million voices cried out, and were silenced . . .

At least only the crazy Dutch are still on the road towards seeing if that 118.6% mark is a hard or soft limit . . .

Japan is at 67% for total household debt, a healthy 2000bps below us.

http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html#axzz28gFdumc5

Then again, their public debt is ~12600 bps above ours . . .

Dammit, my thesis says Japan raises taxes to pension off their retirees -- peaking this decade at ~40M -- and I swoop in as the resulting real estate crash finally makes the place actually affordable.

Somehow I suspect my thesis is not going to apply there though. Something about markets remaining irrational . . .

portland_allan said...
This comment has been removed by the author.
AllanF said...

Yeah, funny how Iceland has fallen down the memory hole. Hard sayin' why that might be. I mean, hard without resorting to discredited conspiracy theories about TPTB and MSM ownership.

Speaking of, why are conspiracy theories categorically discredited? I, myself, don't seen a whole lot of actual discrediting. Usually the discrediting consists of arrogant snark and bandwagon appeals. Well, that is when those doing the discrediting aren't outright lying.

AllanF said...

memory hole

Compare and contrast to TARP circa 2008 & election results barely one month later. Best argument I've witnessed for we get the govt we deserve.

Not sure what Ireland & Greece's excuse is.

Troy said...

population of iceland is 300,000.

"In the euphoria, the dangers of a strategy of "economic growth based on vast foreign borrowing" were overlooked. Icelanders lived out the dictum of Plautus, the third century BC Roman playwright, who had one of his characters declare: 'I am a rich man, as long as I do not repay my creditors.'"

and:

"The supply-side economist Arthur Laffer assured the Icelandic business community in 2007 that fast economic growth with a large trade deficit and ballooning foreign debt were signs of success: 'Iceland should be a model to the world.'"

from:

http://www.hermes-press.com/iceland_index.htm

"The benefits of low taxes are on full display in Iceland, which provides an almost perfect demonstration of the Laffer Curve. "

http://online.wsj.com/article/SB117330772978430098.html?mod=opinion_main_review_and_outlooks

(warning: Kudlow)

As for conspiracy theory, Fuller was going full-on with that in his 1981 book, drawing a connection between the East India Company capitalizing the new US in the early 19th century and the rise of JPM's finance-capitalism in the latter part. He then says "Wall Street Lawyer Capitalism" established itself in the aftermath of the 1920s.

Hard to dispute that I guess.

"Money, money, money -- it's a Rich Man's World" -- Abba, 1976

Stagflationary Mark said...

Troy & AllanF,

One of my favorite musical tributes involves Iceland's racking.

P.S. Also had the ABBA song as a musical tribute once. It was disabled in YouTube though.

Scott said...

Another candidate for musical tribute would be Smashing Pumpkins "1979".

http://www.youtube.com/watch?v=4aeETEoNfOg

Stagflationary Mark said...

Scott,

We feel the pull in the land of a thousand guilts
And poured cement, lamented and assured


Yeah, I think that works. Sigh.