Buy One, Get One Free

Buy one home, get one free: US agents try to beat property slump

The Escondido-based company says it will throw in a free four-bedroom home worth $400,000 (£200,000) for buyers of one of its luxury detached houses, which cost from $1.6 million (£800,00).

Bummer. It is not an item of equal value. It is an item of lesser value. That's not all that much of a sale in the grand [ponzi] scheme of things.

She said the idea, initially a joke, came out of a weekly brain-storming meeting as the company sought for way to stimulate the slow market by "creating a buzz".

Most of our country's "brain-storming" economic policies intended to "stimulate" our "slow market" were "initially a joke", if you like gallows humor that is.

Idle Away in Your Own Winnebago

UPDATE 1-Winnebago idles plant, lays off hundreds of workers

In January, Winnebago said it was laying off 300 workers to deal with the downturn, which drove at least one RV manufacturer -- Perris, California-based National RV -- into bankruptcy late last year.

Those who remain in business are scrambling to adjust by laying off workers, idling plants and -- in the case of Winnebago -- bringing back cheaper, more fuel-efficient van-like vehicles whose popularity peaked during the 1970s oil crisis.

Surely there must be some escape from rising oil prices.

Escape to Witch Mountain (1975)

Tia and Tony sneak into the Winnebago camper owned by embittered widower Jason O'Day, who is traveling alone to see the country.

Strategic Pantry Reserve (SPR)

Oil’s Not Well in the U.S.

But there's a critical difference between housing and oil that makes the impact of higher oil prices much worse. The housing bust is due to a slowdown in the demand for housing, not in the supply of a critical commodity, such as oil.

This means that many of the resources that had previously gone into the housing industry, such as labor and materials, can now be released to other sectors of the economy. In contrast, rising oil prices are an outright cost that does not release other resources into the economy.

The lumber can now be used to make toilet paper (or not). Construction workers can bring their highly specialized job skills to government projects and/or unemployment lines. Real estate agents can bring their people skills to the world of debt collecting. Yeah, things are lookin' real good.

If oil prices continue to rise, I recommend that the government release some oil from its strategic reserve and perhaps raise the margin requirements on oil future markets to reduce speculation. I certainly do not blame speculators for the surge of oil prices, as I believe there are many fundamental forces at work raising energy prices. Nevertheless, such moves could break the inflationary psychology and warn speculators that the price of oil can go down as well as up.

Why stop there? If "some" release is somewhat good, then an entire release must be entirely good. Release it all. That'll show them.

Similarly, I am releasing all the rice from my Strategic Pantry Reserve today. Ah, that feels much better. Times are really good again. I just hope it was a smart thing to...

This is a test of the Emergency Pantry Reserve System. This is only a test. Had this been an actual emergency...

Krugman Sees No Wage Inflation Spiral

A Return of That ’70s Show? (Paul Krugman)

It’s true that the soaring prices of oil and other raw materials have led to public anguish over the rising cost of living. But this time around there’s no sign whatsoever of the wage-price spiral that, in the 1970s, turned a temporary shock from higher oil prices into a persistently high rate of inflation

There's no sign whatsover of the wage-price spiral? First, and most importantly, the stagflation of the 1970s was not isolated to America. It was a global problem.

China officials hike wages, threatening boost to inflation

If companies are told to pay higher wages, they may have to raise their prices to stay out of the red, the economists argued, warning this could be the beginning vicious cycle.

I bring Chinese wages up because unlike the 1970s, "Made in China" seems a very popular sticker these days. We send China our paper dollars and they send us back actual goods. Their workers now want raises? No problem. We can print more money to appease them in the exact same way we printed more money to appease ourselves (tax rebate checks).

Divided Over Trade (Paul Krugman)

We’re buying a lot more from third-world countries today than we did a dozen years ago, and the largest increases have come in imports from Mexico, where wages are only about 11 percent of the U.S. level, and China, where wages are only 3 percent of the U.S. level. Trade still isn’t the main source of rising economic inequality, but it’s a bigger factor than it was.

We can also print more money to appease Mexico if need be. This would be in addition to the Mexican government's monetary printing press of course.

Mexico's poor get food cash boost

Governments around the world are under pressure to intervene to help the poorest cope with the sharp food price rises.

Bad for the Country (Paul Krugman)

About the trade deficit: These days the United States imports far more than it exports. Last year the trade deficit exceeded $600 billion. The flip side of the trade deficit is a reorientation of our economy away from industries that export or compete with imports, especially manufacturing, to industries that are insulated from foreign competition, such as housing. Since 2000, we've lost about three million jobs in manufacturing, while membership in the National Association of Realtors has risen 50 percent.

Those three million lost jobs in manufacturing led to cheaper goods. I think that deflationary ship has just about run its course. Now we're looking at an iceberg (as seen here).

The trade deficit isn't sustainable. We can run huge deficits for the time being, because foreigners - in particular, foreign governments - are willing to lend us huge sums. But one of these days the easy credit will come to an end, and the United States will have to start paying its way in the world economy.

What are they going to do? Stop selling us goods? It seems far more likely they'll just raise prices. Of course, if they raise prices and we continue to buy anyway (think oil), then the trade deficit doesn't really get all that much better. Does it?

To do that, we'll have to reorient our economy back toward producing things we can export or use to replace imports. And that will mean pulling a lot of workers back into manufacturing. So the rapid downsizing of manufacturing since 2000 - of which G.M.'s job cuts are a symptom - amounts to dismantling a sector we'll just have to rebuild a few years from now.

The "free (lunch)" deflation we imported over the last few decades would be undone? I can't argue but it does sound expensive. I think I'll remain a stagflationist if you don't mind.

Zimbabwe: 'RBZ Money Printer Will Run Overtime'

"Government has slowly been pinching away the nation's savings through very low interest rates, well below inflation," Robertson said.

The Macro Wage Curve and Labor Market Flexibility in Zimbabwe

The main cause of falling real wages in Zimbabwe is reduced economic activity.

Other than the magnitude of the potential problem, how is Zimbabwe's inflationary path all that much different than ours? I doubt very much Zimbabwe's wage-spiral can be blamed when their unemployment is 80%.

Liquidity Injected (Musical Tribute)

Sharper Image stores to be closed and liquidated

More than $50 million of inventory is being sold at 86 Sharper Image store-closing sales throughout the United States, liquidators the Hilco Organization and Gordon Brothers said in a statement.

Part of me (certainly not all) thinks this could easily mark a (zz) top of the commodity boom. The following song was released in 1983. That wasn't exactly the best time to still be hoarding gold watches and/or diamond rings.



Gold watch, diamond ring
I aint missin' a single thing
And cufflinks, stick pin
When I step out I'm gonna do you in
They come runnin' just as fast as they can
'Cause every girl crazy 'bout a sharp dressed man

That being said, I remain a long-term paper stagflationist just the same. 1983 was also not a great year to bury paper dollars in the back yard. As seen here, the consumer price index has more than doubled since then. The pure stagflationists might point out that gold has too and that gold watch hoarders in 1983 just needed to be very patient. Who would I be to argue?

May 12, 2008
Gold watch 'fetches millions at auction'

News service Reuters said the price paid for the Patek Philippe chronograph watch is a record high for the auction house that handled the sale, Sotheby's.

Mystery Hoarder Eludes Press in Men's Toilets

Record smashed, Hong Kong wine auction proves a hit

HONG KONG: A press scrum waited for the mystery man in the gray shirt to exit the room. They chased him down the hallway, surrounded him, and peppered him with flashbulbs and questions, until hotel staff intervened and he managed to slip into the men's toilets.

Singgih Gunawan of Singapore finally emerged to address the media briefly in Mandarin. His claim to fame was spending 1.89 million Hong Kong dollars, or $242,000, on 12 bottles of 1990 Domaine de la Romanée-Conti at what proved to be the biggest lot at the biggest wine auction in Asian history.

Perhaps I have taken some liberties with the headlines here. The mystery man might not have hoarded the wine as an inflation hedge. The 1990 wine might be exceptionally good and perhaps none of its $242,000 price tag is even remotely inflationary. It could also be that he was merely thirsty and found no suitable alternatives. Further, he might have actually needed to use the bathroom and welcomed the questions of the press. I've clearly made a lot of questionable assumptions here.

In my defense, especially as it relates to taking liberties (puns intended):

Afterthoughts: To Hell in a Handbag

It’s troubling when mundane, normal, private objects and activities are permanently recast as scary threats. For how long can we not bring a purse? For how long will they make us take off our shoes at the airport? When does the embargo on shampoo end? 2030? 2040? When does this stop?

Level Orange is our new normal—that’s the threat. Not fanny packs. Not diaper bags. We give up a little freedom here, and a little freedom there, all the while being told it’s for our own good.

And then it’s gone, and handbags will be the least of our problems.

See Also:
MaxedOutMama: Kitchen Knives And Cargo Cults

Suze Orman vs. Warren Buffett Revisited

March 8, 2007
Outing Suze Orman's portfolio

Orman estimated her liquid net worth at about $25 million, with another $7 million worth of houses. With just $1 million of that in stocks, it means that just 4% of her liquid net worth is in the stock market.

What does Orman do with the rest of her money? Solomon asked, and was told: "Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound."

As for playing the stock market, Orman said "I have a million dollars in the stock market, because if I lose a million dollars, I don't personally care."

She wanted 100% safe and sound from a risk standpoint, but also wanted superior rewards. Nice trick, huh? Wasn't she clever. How's that working out so far? The investments are looking pretty good as long as you don't factor in muni bond defaults surging, the questionable credit quality of the muni bond insurers, and the questionable assumption that inflation will remain tame long-term.

May 30, 2008
Subprime Finds New Victim as Muni Defaults Triple: Joe Mysak

But wait a minute: Municipal bonds never default, do they? Or at least this is how they are perceived by individual investors, right?

We're probably going to see a lot more munis default this year and in the years to come, because of the subprime crisis and maybe, just maybe, because of the high price of a barrel of oil.

May 4, 2008
Buffett Says Bond Insurers Don't Deserve AAA Rating (Update3)

Credit-rating firms shouldn't be giving top grades to bond insurers that borrow money at 14 percent or whose stock has dropped 95 percent, Buffett said at a press conference today in Omaha, Nebraska, a day after Berkshire's annual meeting.

June 1, 2008
Bank set to keep base rate at 5% as inflation continues to rise

The chief executive of HSBC bank, Michael Geoghegan, last week called on the Bank of England to raise interest rates, saying: "Inflation is a long-term problem because there is no long-term will to solve it."

See Also:
Suze Orman vs. Warren Buffett

Greenspan vs. Curly

Greenspan: Inflation, Yes. Stagflation? Maybe.

Alan Greenspan has some bad news and some sorta bad news for Americans on Friday: Inflation is here and stagflation might be around the corner.

Nyuk Nyuk Nyuk! - Curly of the Three Stooges

When asked about the potential for stagflation, a combination of weak growth and high inflation, Greenspan said, "Oh certainly."

Soitenly! - Curly of the Three Stooges

Greenspan also said, contrary to many the opinion of many, that there isn't a commodities bubble building.

Are you casting asparagus [aspersions] on my cooking? - Curly of the Three Stooges

"Once you get inflation pressure starting to emerge, you don't get bubbles." he said.

I resemble that remark! - Curly of the Three Stooges