Four Simple Solutions to Make Housing More Affordable

June 16, 2016
MarketWatch: Why there’s a new kind of housing crisis

The “crisis” is no longer defined by the layers of distress left behind after the subprime bubble burst, but about access to stable, affordable housing.

Simple government solutions exist.

1. Always lower interest rates faster than housing prices rise. That way mortgage payments will eventually fall to zero, and maybe even turn negative like the 30-year Swiss bond just did.

2. Always raise interest rates faster than housing prices fall. Push those prices low enough and people won't need a mortgage.

3. Always lower wages slower than housing prices fall. This one's tricky. It may feel like a deflationary depression. Been there, done that. Again.

4. Always raise wages faster than housing prices rise. This one's also tricky. It's tough to stop the bidding wars once workers have good money coming in. Then again, maybe much of the bidding will be confined to canned goods, toilet paper, ammunition, oil, and precious metals instead. In the name of housing affordability, one can always hope!

Surely, with the government's help of raising and lowering interest rates and wages randomly, some combination is eventually bound to create stable, affordable housing. Or not.

Despair.com: Government

If you think the problems we create are bad, just wait until you see our solutions.

Switzerland's Humanitarian Aid

May 31, 2016
CNN Money: Venezuela is running out of everything: Bread, sugar, toilet paper...

In order to get cash loans to pay for its debt, Venezuela has shipped $2.3 billion of gold to Switzerland so far this year as collateral, according to Swiss government import data.

Reminds me of a favorite quote.

What is it that makes a complete stranger dive into an icy river to save a solid gold baby? Maybe we'll never know. - Jack Handey

May 31, 2016
Los Angeles Times: It costs $150 to buy a dozen eggs in Venezuela right now

Yikes!

The Swiss Cheese Higher Interest Rate Theory

March 8, 2015
SNB considering higher negative interest rates: Schweiz am Sonntag

Citing sources close to the SNB, Schweiz am Sonntag said "a rate of minus 1.5 percent is being considered".

As far as Switzerland is concerned, there are definitely holes in the higher interest rate theory.

It would seem that once rates go negative, higher rates means they go even more negative. Who knew? No wonder economists are so worried about the zero lower bound. It's an event horizon for interest rate black holes. Reality shifts as the boundary is crossed.

Perhaps savers should start thinking about the -100% "higher" bound. That's a level that should never be breached, at least in theory. In practice though, perhaps a properly determined government could actually tax your losses, lol. Sigh.

"Says here that you lost 100% of your money. Can you afford the taxes on that or would you like to take out a loan at one of our prestigious private commercial banks? Just doin' our part to stimulate the strong and robust global credit economy! Thanks for participating!"

Bank Ride of the Valkyries (Musical Tribute)

The following chart shows the 5-year moving average of bank deposits at all commercial banks divided by GDP.


Click to enlarge.

Hurray! Another parabola! If there's one thing I like to see, it's unsustainable parabolas in the banking system. This one, like all others, is guaranteed to fail at some point.

On the one hand, we're slightly below trend right now. This could be the start of a trend failure.

On the other hand, I am not at all confident about long-term GDP growth from here. The trend could therefore recover.



November 21, 2002
Deflation: Making Sure "It" Doesn't Happen Here

A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

Perhaps the helicopters should have been deployed more evenly? I sure don't see much that has prevented "it" from happening yet. If flooding the banks with cash is so effective, then why hasn't it worked in Japan or Switzerland?

December 18, 2014
Swiss National Bank will cut interest rate to minus 0.25%

Switzerland is also chary of attracting yet more money into its banking-heavy small country.

Bank Run

A bank run (also known as a run on the bank) occurs in a fractional reserve banking system when a large number of customers withdraw their deposits from a financial institution at the same time and either demand cash or transfer those funds into government bonds, precious metals or stones, or a safer institution because they believe that the financial institution is, or might become, insolvent.

Switzerland is begging you to run! For the love of all that is holy, please stop relentlessly assaulting their banks with your helicopter money!

Source Data:
St. Louis Fed: Custom Chart

Parabolic Trend Failure of the Day: The Middle East Cries Uncle (Sam)

The following chart shows the 522-week (~10 years) moving average of crude oil imports.


Click to enlarge.

The parabolic trend in red is failing to the downside. It is currently being pulled towards the blue line (which shows the average daily crude oil imports over the past year).

Never underestimate a weakened US economy combined with a booming North Dakota!

December 8, 2014
Oil drops $2 to five-year low on oversupply

The U.S. shale industry has yet to be hit by the slump in crude prices, Baker Hughes said in a report on Friday, reporting three new U.S. oil-drilling rigs had been added in the last week.

Rising interest rate environment! It's the only way to stop the relentlessly upward trend in oil prices! Oh, wait. Never mind. I think I have that backwards.

In all seriousness, any further attempts at $100+ oil by the Middle East will probably be met by increased oil production in the Middle West. You don't have to be a rocket fuel scientist to figure that out. Well, unless you work at ShadowStats anyway.

Speaking of which, I anxiously await their next imminent hyperinflation special report, just like I do every year. As a saver with deflationary tendencies, they just get more and more amusing!

Subscription fees of $175 per year? Every year? And they take a credit card? That's a ridiculous thing to do during hyperinflation! I don't mean to be preachy, but I feel the need to offer them some free advice.

1. You are providing a service! Crank up those fees to match the inflation you see in our real service economy! Don't get left behind! You can't afford to show weakness as the whole country falls around you!

2a. Credit cards? During hyperinflation? Seriously? That's insane! At the very least, you should be getting paid in canned goods, gold, silver, copper, toilet paper, cattle, ammunition, or dare I say it, imported French sparkling natural mineral water (Perrier)! Just think of the hyperinflationary panic! Create a self-fulfilling prophecy and the paid newsletter world becomes your oyster!

2b. Credit cards? When you know "full well" our country has a serious debt problem? Seriously? What kind of message are you trying to send? That's just got bad public relations written all over it. Did you learn nothing of BP's liability nightmare?

3. Speaking of "full well" and oil, have you ever considered creating an imminent hyperdeflation special report written in Japanese or Swiss Standard German? Go global! Increase your market share! Attract a wider audience! Heck, the Swiss central bank might even buy you out!

Source Data:
EIA: Petroleum & Other Liquids

Mount Gaseous Plentifulness

The following chart shows the 1000-trading-day average of the natural gas spot price.


Click to enlarge.

Ever get the feeling that our monetary leaders are running a grand experiment and have no idea how it will all turn out? Yeah, me too.

Perhaps Switzerland knows.

August 14, 2014
Swiss Deflate the Deflation Theory

For more than four years, consumer prices in Switzerland have risen at an annual pace well below 1 percent. In 2012 and 2013, the country even experienced deflation. Yet its economy has grown at a steady pace, and is expected to expand by 2 percent this year. The unemployment rate is a low 3.2 percent.

We should be so lucky. Perhaps they should too. Over the long-term, their real GDP growth is slowing relentlessly (as is quite evident when using the log scale).

Wow! I managed to make it through this deflationary post without mentioning Japan. Well, almost.

Source Data:
EIA: Natural Gas Spot and Futures Prices (NYMEX)