http://www.europac.net/commschiff.asp?id=16291

Quote:Given that we are entering uncharted territory with price declines much sharper than those seen in the Great Depression, I would argue that the 100-year price trend would be the better projection to use. In such a scenario, the index would bottom out at around 108 if a 10% overshoot on the downside is seen. That leaves another 34% decline in home prices on the table.

But that doesn't mean that I believe home prices will actually reach those levels, at least in nominal terms. Inflation will likely be the biggest difference between the current recession and what is now called the Great Depression of the 1930s, (I expect a new name will be needed in a few years, much as the Great War is now called World War I.) Throughout the Depression, prices fell for everything, not just houses. At the time, even the pump-priming policies of Roosevelt's New Deal did not expand the money supply at anywhere near the current pace. As a result, the deflationary pressures of a recession were allowed to push prices down.

In the coming years, the opposite will happen.

Sounds eerily familiar

This is just too horrible to imagine. First our leaders destroy the SS system, then rape our 401k, and finally destroy the housing market. The perfect storm to fistfuck everyone.

Quote:But the benefits of seemingly stable home prices will be illusory. What good is a $200,000 house if it costs nearly that much to fill the refrigerator? However, inflation putting a floor under home prices does nothing to increase real demand for houses. With the prices for stocks, commodities and food going up faster than the prices of homes, residential real estate will remain a lousy investment. As a result, be wary of those who have called a housing bottom and now recommend beaten-down homebuilding stocks.

Hmmmm interesting.

I have to digest a lot of what he wrote vs my own inteligence, but one thing stood out - that the current inventory of homes will last for a generation or more. That doesn't hold water for me, because even assuming that parents can't sell homes, they will have kids that are eager to move up and out of the home, and that doesn't matter if that is to a purchased home or to a rental property.

The USA is simply not seeing a populaton reduction - more room is required. Inflation hitting the USA affects the whole world, so bad inflation here isn't as bad as inflation in your home state, and coming to America is still the best answer to your home state problems. There is no demand for nuclear family housing arrangements like you see in Asia or Latin America....... kid gets to 18 or so, and they are out to live on their own (yes, there are and will be understood exceptions, this is the internet I can't type out each exception to the rule)

You will see some sort of ghettoization / abandonment of far out suburbs and and certainly a fair number of subdivisions might actually be abandonded, and this will further increase the need for more housing - especially in cities and ring suburbs. There is some of that already in the far southern suburbs of Chicagoland like Plainfield and even some up here in Mpls area 40 miles to the northwest in St. Michael.

I wonder how long it would take a modern balloned framed home to fall apart? My home was build in 1916 and could probably withstand an explosion. I have no doubt that someone will be living in my home 100 years from now, probably longer. Can you say that about balloon frame housing? Not sure.

a year ago Schiff was predicting inflation in the fall and winter, which the reverse happened. so he is not gospel as much as many make him out to be. Not to mention he was heavily telling people to flee the dollar, which did not work out well for him

If this happens though, or if Sales remain flat long enough, new home builders are doomed. Builders will go bankrupt, but new builders will emerge and buy up the assets(abandoned developments) for pennies on the dollar in bankruptcy court.

a Commercial Real Estate broker told me the other day that the market is starting to show signs of life again.

I know a couple months ago, DR horton bought like 10 developments in Union County(outside Charlotte) from builders who were pulling out.

I took that as a sign they think sales of new homes are coming back around and they have the strength to weather the storm till then. On other hand maybe they are wrong

Schiff's analysis matches what I mused. The gov't is willing to risk inflation b/c it felt like deflation was going to hit (w/ overproduction, especially in housing).

To me it's like driving w/ the brakes on and stepping on the accelerator. Sure you can control speed that way, but eventually things burn out.

That being said, this burn out will come relatively soon (approx 1 year) IMO, b/c markets just aren't available, and things are slowing down.

there are alot of variables at play, which is why no one economist is ever perfect.

I've read some analysis claiming we will not have 70's style inflation again, partly because there isn't a generation of Baby Boomers hitting the marketplace increasing Demand for everything which in itself drove up the prices of things. Which is part of what went on in the 70's

Schiff (who called for the current recession in 2003) and his fellow Austrian economists are completely correct as usual.

Here's a good video for you DrTorch ... one of my favorite quotes from it: "Which would you rather buy ... Yahoo! or New Zealand ... because they have the same value according to Wall Street."

"Why The Meltdown Should Surprise No One"

Schiff never predicted the actual doomsday part of the meltdown, just that there was a housing bubble. Liberal nut Keynsian economist like Paul Krugman called it a housing bubble in atleast as early as 2004

Nobody was ever saying the Credit Default Swaps would go nuts the way they did, nor the magnitude of what they could/did do in Financial terms. It was like getting insurance on a $50k Cadillac and when you totaled it(foreclosesure) it paid out $2 Million dollars. The only predictions made were based on housing prices falling and construction drying up.

Schiff was mainly a doomsdayer, always has been. What doomsdayers do is predict economic destruction, a broken clock is right twice a day(or appears to be right as it were). All the doomsdayers are heavily invested in Gold, still trading at $900/ounce after all the pumping they've done for it.

There are of course other schools of thought in Austrian Economics that are not of the same thought. CafeHayek.typepad.com is one that comes to mind of top of my head.


Schiff has lost his clients tons of money in recent years, because he kept preaching a Hyper-Inflationary economy, he was 100% Dead Wrong. The Exact opposite happened, and we had a Deflationary meltdown. You could do a Youtube video on his past statements on that, what he said to invest in(Commodities, and sell dollars) and he would look like an idiot.

(05-26-2009 04:03 PM)GGniner Wrote:  I've read some analysis claiming we will not have 70's style inflation again, partly because there isn't a generation of Baby Boomers hitting the marketplace increasing Demand for everything which in itself drove up the prices of things. Which is part of what went on in the 70's

I don't buy that analysis of the 70s, mainly because:

The baby boomers weren't a new phenomenon in the '70s.

No, inflation soared b/c:

1. Oil skyrocketed and the US was unprepared.

2. We had a mini-ice age creating an increased demand for energy, w/ no good supply...largely b/c of "no nukes" in the late 60s early 70s.

3. These two increased demands raised prices on everything. Meanwhile labor demanded, and was granted, higher wages to cope w/ the changing world around them. This increased inflation and then led to the massive shutdowns of the late 70s and early 80s.

This fits w/ yet another piece,

4. US had little quality control and production improvements, leading initially to higher prices, then ultimately restrictions were eased which allowed increased imports and further job losses. But the inflation eased w/ the imports.

The cause of this is debateable, certainly US industry ignored William Demming's work...but I can't help but wonder if some of this was tied to the Apollo missions. At Apollo's start concerns were voiced that these missions would suck up the best US engineering talent, and the country would suffer. This notion was dismissed at that time, and still is today, even by Nobel Laureates. However, the empirical results certainly fit w/ that hypothesis, and I think it's proof that even top scientists can choose to make up their minds and ignore the data.

Meanwhile,
I happen to believe we have a population that's growing strong enough to support the "baby boomer conumption" thesis. It's not as big a percentage of the overall population, b/c the population is larger. But, the numbers show that the US is seeing a "baby boomlet"
http://www.foxnews.com/story/0,2933,323028,00.html
plus we have high immigration, and longer lifespans (particularly of the 70M baby boomers).

All that being true, anyone predicting less inflation than the '70s based on population, is waaaaay off.

Frankly, the US' approach to this mess should only fuel 70s-style stagflation. We're overregulating, overtaxing, limiting competition and thus innovation, all while various forces are drying up markets. Eventually businesses will fold, leaving fewer manufacturers, and prices will rise, b/c suppliers are prevented from entering the market. Only imports will offset that, so if we enact tariffs, or see shipping decline for some other reason, we will get the privilege of reliving 1977. I hope you have your leisure suits ready.

As for Schiff, GTS and others have posted many times that he predicted the financial crisis. He gets credit in my book for that (it's comical to here people say even today that "nobody" saw this crisis coming) That's why I thought his prediction would be appreciated here.

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Now this is not racist or anti-immigrant or any of that other crap people get accused of.

BUT ,,, the U.S. WOULD be seeing a Population Decline just as all of Europe is seeing if it were not for the influx of Hispanics crossing the border.

Believe it or not, the Mexican Migration is actually saving our asses right now and keeping us at the minimum 2.6 Per Family Population Ratio.

If it were not for this factor, the U.S. would be in the 1.6 to 1.8 range and in an Unsustainable Negative Population Plunge.

If we don't stay at or above that 2.6 Level, then we are going to get owned by a Race that will come in an Procreate like Mice.

Europe is already down the tubes as far as the Numbers show, so hopefully we will at least keep our heads above water and hang level.

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well, one thing they had in the 70's was "COLA's": Cost of living wage increases were common. I think they were 7% automatic raises back then. What is the chance of that repeating? Pretty low, I suggest but who knows. For the last 15 years or so most folks are happy with a 3% increase
and that's with a darn good review.

2. As boomers retrench from spending aggregate demand could recede, which would be the opposite of what happened with the boomers as they hit adulthood in the 70's?

the key will be commodity prices probably, labor cost in manufacturing should continue to go down with increased Productivity trends continuing. Alot is going to depend on how far Obama goes with things, what the left beleived in then they do not now?

speaking of Europe, Global Events play a huge role today on our Economy. More so than they did in the 70's(even with the Arab Oil Embargo).


China(and Chinese Monetary Policy) was a culprit behind the Housing boom, hardly any US economist ever points a finger their way.

although the US fertility rate is up to about 2.13. (highest since 1971) Immigration is the only factor which contributes to an increased population growth. but that population group will diminish when work becomes harder to find.

(05-26-2009 04:51 PM)GGniner Wrote:  well, one thing they had in the 70's was "COLA's": Cost of living wage increases were common. I think they were 7% automatic raises back then. What is the chance of that repeating? Pretty low, I suggest but who knows. For the last 15 years or so most folks are happy with a 3% increase
and that's with a darn good review.

Yes, and that's why places eventually shut down in the 70s and 80s. Unemployment soared during Reagan's first few years in office...because USX and others had stretched themselves for so long trying to pay workers these ridiculous wage increases.

Will we see this again? Not exactly the same, but w/ over half the population working for governments, we're seeing a similar phenomenon.

Quote:2. As boomers retrench from spending aggregate demand could recede, which would be the opposite of what happened with the boomers as they hit adulthood in the 70's?

That's not likely to happen. Boomers are pretty set that they are going to live in their sunset years. Not meant to be a criticism, but they are a healthy 63 years old, and expect to live a long time. That will mean more conspicuous consumption in new areas: vitamins, AirStream trailers, etc.
But, they've already conceded they'll have to work longer to maintain this lifestyle. That's going to affect newcomers to the job markets. The impact on inflation is tough to call. Baby boomers have lots of experience, so they usually command a higher salary, keeping prices high. However, many are looking to new "retirement careers" (I just made up that term, so look for Steven Chu or others to use it soon) so they'll willingly take lower salaries to do start a new vocation.