Real estate

http://finance.yahoo.com/q/bc?t=3m&s=SRP...

Top 858. Nov 6, 2005 9:51 PM

» BillBowden - Re: For Experienced Investors Only!

In response to For Experienced Investors Only! posted by Normxxx:

I can buy the Short Real Estate Profund (SRPIX). This fund’s goal is to return the inverse of the Dow Jones U.S. Real Estate Index (usual index symbol: DJUSRE). It’s a new fund, but it’s achieved its objective so far.

Yes, SRPIX is a hedge against real estate, but hasn't done too well so far. I'll keep my AVB for now, which is almost a record high.

-- posted by BillBowden

Top 859. Nov 9, 2005 2:52 PM

» Normxxx - Don't Let Housing'Scare You

Don't Let Housing's Seasons Scare You

By Michael Englund | 9 November 2005

Is the sky truly falling on the U.S. real estate market? The historical record is loaded with up-and-down cycles tied to the time of year

Should participants in the U.S. housing market take a cue from the title character of the latest Disney (DIS ) film, and wonder if the sky is falling? Industry reports of moderating prices— and a profit warning from major builder Toll Brothers (TOL ) on Nov. 8— have raised worries about a significant downtrend in home prices (see BW Online, 11/9/05, "Housing: Red Alert, or a Wake-Up Call?"). But is there cause for alarm? Not really. The answer lies in one key word: seasonality.

Indeed! The recently released monthly data imply little about annual trends. Prices decline sharply in nearly every fourth quarter in this highly seasonal industry. Declines are particularly big in years that have seen large gains in the second and third quarters— like 2005.

CHARTING PRICE TRENDS. With that in mind, we at Action Economics decided to take a closer look at this seasonal pattern in existing-home sales prices and show why there's little hard evidence of moderation beyond the seasonal drop— a pattern that's more potent than many analysts realize.

<img Align="Left" hspace="10" vspace="5" src="http://www.businessweek.com/investor/pi_..."> The table at left shows quarterly annualized growth in median existing-home sales prices this year vs. the average of the last 10 years, 20 years, 30 years, and since the start of our data set in 1968.

To gauge price trends, the market follows these "not seasonally adjusted" data, as well as anecdotal reports from industry participants about listing prices, offers above list, the volume of multiple offers, and the time on the market for each existing home.

LAGGING BEHIND. These anecdotal reports, which reflect the opinions of individual real estate agents and housing-industry executives, are subject to the same seasonal swings as median prices overall. Hence, reports of moderation late each year, and early in the following year, are always suspect. This problem is aggravated by the fact that the seasonal declines in the fourth quarter are particularly large in years when the seasonal surge in the second and third quarters is large as well, thus turning normal seasonal gyrations into market-moving headlines.

Better price data can be found in the quarterly average price figures for "repeat sales" from the Office of Federal Housing Enterprise Oversight, but with painfully long lags: The last available report is for the second quarter of 2005. Because of the delay in release times— third-quarter data aren't be reported until Dec. 1— the figures can't provide clues on more recent price trends.

But the chart is still instructive: The big price overshoot in the first and second quarters suggests that a significant moderation could eventually be reported for the third and fourth quarters, without having any meaningful negative ramifications for price trends as we enter 2006. Why? First-half overshoots are often followed by second-half undershoots from the annual growth trend.

GEOGRAPHICAL LINES. This exacerbation of seasonal patterns in existing-home prices is probably due to the big shift in the composition of the housing stock toward the South and away from the Northeast. The order of strength in this seasonal pattern places the South first in line, followed by the Midwest, the Northeast, and the West.

The average second-quarter price growth rate in the South has reached 22% over the last 10 years, from a still-impressive 17% rate over the last 36 years. But narrow the focus to the final quarter of the year, and seasonality rears its head yet again: The region's prices on average have declined by a hefty 6% for that period over the last 10 years.

In the Midwest, we see slightly less powerful second-quarter price growth rates of 18% over the last 10 years, and 14% over the last 36 years. The fourth-quarter price declines in this region are relatively big, however, with an average 10% drop over the last 10 years, and a 7% rate of decline for the 36 years. This year, the price surge in the second and third quarters was particularly severe, with quarterly growth rates of 62% and 16%, respectively.

SPRING BREAK. The Northeast seasonal swings are more subdued by comparison, though still significant. We see average price growth of 8% in the second quarter over the past 10 years, with an even-bigger 10% growth rate in the third quarter. This year, Northeast prices actually fell at a 5% rate in the second quarter, but only because of the atypical forward lurch of 50% in first-quarter prices.

Seasonal swings are arguably the smallest in the West, though it saw a particularly large second-quarter surge this year, with growth of 47%. This has been followed by a more concentrated contraction as we enter the fourth quarter, with a projected 20% pace of decline. Though the fourth-quarter drop seems impressive, it just reverses part of the early surge, leaving a full-year price gain of 12%.

In general, these powerful seasonal patterns reflect known real estate trends. The spring tends to be a sellers' market— with a supply-demand imbalance that's particularly large in boom years— and the quarter in which most transaction volume is initiated. The bigger the boom, the bigger the correction. It will be especially hard to read anything into fourth-quarter price data, and into similarly "unadjusted" anecdotal evidence from industry experts, until we enter the next high-volume period in the coming spring.

WAIT AND SEE. Financial markets have generally viewed anecdotal comments that transaction volume and price measures are now cooling as signs of trouble for the housing market. But like the fictional fowl struck by the acorn, they appear to be jumping to a premature conclusion. The declines thus far in reported median prices for existing-home sales are small compared to the outsize advances in the first three quarters of the year. Furthermore, the cycle seems to mirror the powerful and widening seasonal swings that are typical for the industry.

The bottom line: It's hardly clear that recent reported price drops are significant in the context of seasonal patterns. The jury will remain out for this sector until we enter the next typical period of price strength for home sales— the second quarter of 2006. Until then, for the housing market, a wait-and-see approach is advised.

-- posted by Normxxx

http://www.benengebreth.org/housingtrack...

Top 860. Nov 10, 2005 4:39 PM

» pete2214 - Interesting site

This might help some people that track the current inventory

-- posted by pete2214

Top 861. Nov 12, 2005 5:42 AM

» SteveT - A Bubble-icious Tax Cut

By RODNEY EVERSON

IN 1997, THE RELATIVELY NEW Republican Congress passed a change in the tax treatment of housing. This change was completely unexpected at the time, and no major group appeared to have been lobbying for its passage. Nevertheless, it appeared in the law and has had a substantial consequence -- a housing bubble of historic proportions that was also completely unexpected. The story demonstrates how strongly tax laws drive individual decisions. The decisions made in response to the 1997 change were massive, are continuing, and will lead to no good end.

The change was simple: An individual could sell a primary residence and exclude the first $250,000 of capital gains ($500,000 for a couple) from taxable income. The only restriction: The house must have served as that individual's primary residence for two of the five years prior to the sale date. How convenient for the dozens of former Democratic members of Congress who were selling houses in Washington, D.C.

Before 1997, tax law allowed an individual to avoid or defer capital-gains taxation on a primary residence. But to do so, the sale proceeds had to be reinvested into another primary residence within 18 months of the sale date.

Such tax treatment, especially when coupled with the tax-deductibility of mortgage interest and real-estate taxes, made housing an excellent investment, but it was always viewed as a one-time, long-term investment. Once invested in the market for homes, people rarely cashed out until retirement, at which point they took advantage of a provision allowing a one-time exclusion of the gains on the sale of the house.

After 1997, it was possible to cash in the gains on more than one house at a time. It also was much easier to invest one's labor in building or improving a house and then cash out the proceeds tax-free. The owners of vacation homes, some owned for decades, found that they could sell their primary residences, cash in the gains tax-free, move to those long-held homes on the shore for two years and become eligible to cash in 20 or 30 years of accumulated gains again.

Seeing this, some decided that owning two homes, or three, or four -- there was really no limit other than the number of times one could stand moving -- was a great investment idea.

Of course, there was a tax-induced surge in prices (in a near-zero-inflation environment, incidentally). In turn, that convinced many homeowners to build additions or purchase larger, more expensive housing, so that the eventual gains would be even greater.

Young people, seeing the investment implications, entered the housing market earlier, traded up more quickly and bought more aggressively. Older people, seeing the strength in prices and eyeing the potential for accumulating significant tax-free returns, began purchasing second homes in retirement locations earlier than they might have done otherwise.

While the rest of the economy in 2001 and 2002 was perceived to be in danger of deflating, house prices inflated. This anomaly was driven by tax law, though the impact of the change in tax treatment has rarely been acknowledged. Deflation in many other goods markets resulted in lower interest rates, making financing easier and generating tremendous leverage for homeowners refinancing or moving up in the market. As a result, the housing market remained strong throughout the 2001 recession, a phenomenon not seen before but completely consistent with tax-induced investment behavior.

In a recent Barron's article ("The Bubble's New Home1," June 20), Robert Shiller presented an excellent analysis of the trend in inflation-adjusted housing prices over the past 115 years. He noted that while the 1997 increase was only 2.1% in real terms, the rate of increase had accelerated to 5.8% by the year 2000, hit 11.2% last year and was likely to exceed a 15% pace for the first quarter of this year. A result: By the end of 2005, housing will be priced at nearly twice the level expected using over 100 years of comparative pricing data. And nearly all of this doubling in the relative value of a house will have occurred since 1997.

Anyone who has observed the distorting impact of tax laws on investment decisions over the past few decades must know what is likely to happen eventually.

The owners of boxcars in the 1970s who saw them sit idly on sidetracks through the 1980s remember how much overbuilding favorable tax treatment can generate.

The owners of apartment buildings in the mid-1980s remember how rough the market can get when long-standing tax treatment turns unfavorable.

And the owners of Nasdaq stocks in 2000 remember know how prices can fall when speculative interest fades.

The problem with tax-induced behavior is that it is difficult to forecast the extent of the irrationality it will cause and the timing of its end.

The administration and Congress must recognize what has been created here, but they must be careful if they attempt to address the situation, because a serious decline in home prices would create millions of angry constituents, hungry to fix the blame on someone.

Eventually, the previous tax treatment should be reinstated, as its impact on speculative behavior was comparatively benign.

In the meantime, Fannie Mae and Freddie Mac should be pushed to strengthen their balance sheets, so that a significant decline in housing prices doesn't turn into a huge call on tax revenues.

The economy quite likely has been operating at a significantly higher level than it would have without the tax-induced rise in housing values. When housing turns out to be dramatically overpriced, it will be interesting to see if the current level of economic activity is sustainable.

Adding to the danger of this situation is that the 1997 tax change enables homeowners to exit the housing market without the former requirement of having to re-enter it within 18 months to avoid taxes. If the housing market turns down, the current tax law permits adoption of a more-or-less-permanent exit strategy.

Stock-market investors burned in a crash aren't forced back into the market by tax considerations. Following a bubble, stocks often trade at distressed levels for a decade or longer as those burned refuse to purchase stocks.

Applying this reading of market psychology to real estate would suggest that a recovery from a serious decline in housing values awaits the next generation of investors.

RODNEY EVERSON is a retired investment manager and broker. He now runs a reading-instruction business in La Crosse, Wis.

Barron's welcomes submissions to "Other Voices." Essays should be about 1,200 words in length, and sent by e-mail to the Editorial Page editor at tg.donlan@barrons.com
URL for this article:
http://online.barrons.com/article/SB1131...

-- posted by SteveT

Top 862. Nov 15, 2005 5:28 PM

» Normxxx - Outlook sours for RE

Outlook sours for real estate
Many indicators point to a major slowdown in home prices.

By Les Christie, CNN/Money | 15 November 2005

NEW YORK (CNN/Money)— Did homeowners who sold in September get out just in time?

The latest report on third-quarter home prices, released Tuesday by the National Association of Realtors, showed continued strength. But increasingly there are signs that prices have plateaued.

Of 147 markets tracked, 69 had gains from a year ago of more than 10 percent— only six metro areas experienced declines. But from the second quarter to the third quarter, the national median home price rose to $215,900, up just 3.8 percent. That contrasts with a 10.4 percent jump in the prior quarter.

And more and more leading indicators are pointing to a slowdown. In Boston, real-estate investor Matthew Martinez reports recently having spoken to five condo converters. "They all said the party was over," Martinez said. In Florida, Elena Filipa, vice president of the Corcoron Group in West Palm, said "We've leveled off. I would say prices will go up this year, but not as fast as they have."

None of this surprises the many economists who have been waiting for a downturn. Richard DeKaser, chief economist for mortgage banker National City, has been reluctant to call the top, but thinks it has finally passed. "We're coming down the other side of the mountain," said DeKaser.

The signs include:

Builder pessimism The builders DeKaser surveys are less optimistic than they were even a few months ago. Separately, one leading builder, Pennsylvania-based Toll Brothers, announced last week that expected demand for 2006 would be down, resulting in moderating price increases and fewer sales.

New-home sales declining DeKaser also notes that the number of new homes sold have fallen sharply since peaking in July at an annual rate of 1.3 million units.

DeKaser calls new-home sales (rather than existing-home sales) the canary in the coal mine. "Developers tend to be more sensitive to market conditions," he said. They have cash flow issues, payrolls, and loans that put more pressure on them to sell.

Ordinary home sellers are often more selective than developers, even taking properties off the market if they don't get the price they want. Developers have to drop prices to move inventory.

Inventories rising Supplies of new homes are way up, to nearly 500,000 units, from 350,000 a few months ago. "That's an all-time high for new homes," says DeKaser. The higher the inventory, the more likely prices will fall.

Sell times are up Houses are sitting on the market longer. New homes now take about 4.1 months to sell and existing homes 4.7; both figures are up substantially.

What to expect

In a recent survey, NAR members say they predict home prices to rise only 5 percent in the next 12 months. Nearly half of the realtors predict prices will rise less than five percent and 6.4 percent actually expect prices to fall.

"You can't expect double-digit price increases to go on forever," said Walter Molony, spokesman for NAR. "We're seeing a market in transition in which there'll be an easing of price increases in the future."

While DeKaser expects a slowdown, he predicts an "orderly transition" for the most part, with some exceptions. "There will be busts in some markets," he said. "Mostly, we'll come out of it unscathed."

For the most part, DeKaser doesn't envision nominal losses. He thinks home prices will decline 1.7 percent during the fourth quarter of 2005 and stay almost flat all the way through 2007.

But history shows that some over-valued markets could fare much worse.

Molony points out that the most severe drops in real-estate prices are usually triggered by an underlying economic crisis. After oil prices went into a six-year decline in the late 1970s, housing prices in oil cities experienced steep drops. In Oklahoma City, prices plummeted 26 percent in real dollars from 1983 to 1988. With inflation, the "real" loss was more than 40 percent. Houses in many oil patch cities are worth less in real dollars today than they cost more than 20 years ago.

How to protect yourself

It may already be too late to cash out at the top, which some residents of hot markets have already done. About 500,000 California residents moved out of state since 2001, according to economy.com, many to take advantage of lower housing prices elsewhere.

But houses are not really investments in the same way stocks or bonds are. As an investment, timing the market is touchy— miscalculate and it can cost you. If, for example, you cashed out a year ago in Los Angeles, expecting to buy back in at a lower price, you'd have to spend nearly 23 percent more for a similar house this year.

Add closing and moving costs and commissions and it could cost 30 percent more to get back into the market. Cashing out just doesn't make sense except for retirees or others in a position to relocate or downsize.

People looking to buy right now should shop carefully. Look at a number of homes, try not to fall in love, and be realistic about prices. Don't be afraid to bid low. The days of multiple bids may be over for a while.

With interest rates rising, try to get into a fixed-rate loan. Adjustable rate loans could adjust to a much higher level when they come due, making monthly bills much costlier. ARMs rates are so close to fixed at this point, it costs little extra to forego the risk of higher rates in the future.

______________

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

Top 863. Nov 18, 2005 6:52 AM

» pbradford6 - Another View

A.G. Edwards & Sons
1 N. Jefferson Ave.
St. Louis, Mo. 63103

HISTORY SHOWS THAT HOUSING is often the strongest part of the economy in the early stage of an expansion when interest rates are still low. As the economy improves, the Fed starts to worry about inflation, and policy makers push interest rates upward in order to contain inflation. As interest rates increase, housing usually cools off. If the Fed does not push interest rates too high, the slowdown in housing does not hurt the overall economy because spending in other sectors supports economic growth.

Housing has once again led the economic expansion in the current cycle. The Fed has also raised rates in order to prevent inflation from spreading. This policy is working. Core inflation remains low, despite the surge in energy prices over the last year. In addition, housing activity is cooling off, and home price inflation is subsiding.

Housing is cooling off for two main reasons. First, interest rates are no longer as low as they were a year ago. Second, home prices have increased, and housing affordability recently declined to the lowest level since the early 1990s.

The slowdown in housing will be a damper on economic growth in the year ahead, but will probably not derail the economic expansion. The stabilization in home prices will reduce speculative home buying because it will be harder to make a quick profit, if prices are no longer rising at a rapid pace. In addition, consumer spending will probably be more subdued. If home prices stabilize, consumers will not be able to tap into home equity as easily.

Housing is unlikely to collapse across the whole country. Rebuilding hurricane-damaged areas along the Gulf Coast will support construction in the year ahead, even if home sales and construction slow down in other parts of the country. In addition, prices are not likely to collapse everywhere, although they could decline in some very overpriced communities.

A big drop in home prices is less likely than a drop in equity prices. People dumped stocks when prices started to slide. Homeowners are less likely to sell the house that they live in just because the price has dipped.

If the economy remains healthy, the housing market is likely to slow down, but not dramatically. The greatest risk to the housing market would be an increase in the unemployment rate that would make it difficult for people to pay their mortgages. At this point, a full recession with rising unemployment is a low probability because businesses are still in good financial shape. Companies are not overspending as they usually do at the end of an economic expansion.

Finally, a moderation in home price inflation is good news for the Federal Reserve. If home prices are no longer rising at a rapid rate, the Fed may not have to raise interest rates substantially further. Another rate hike or two appears likely given recent comments from the Fed. However, if inflationary pressures are subsiding, the Fed's job may be nearly finished.

--Gary Thayer, chief economist

-- posted by pbradford6

Top 864. Nov 18, 2005 9:36 AM

» Bill_Duffy - Re: Re: Another View

.
Seems to me the Financials are looking forward to the end of Fed tightening. Look at the Bank Index: http://finance.yahoo.com/q/bc?s=%5EBKX&t...

-- posted by Bill_Duffy

Top 865. Nov 18, 2005 10:59 AM

» Normxxx - Re: Re: Another View

In response to Re: Another View posted by Kirk:

The market seems to be agreeing with me that AG will impose two more .25% raises and that there is at most a 50:50 chance that BB will raise another .25%. After that, we pause. But, I do not think that will prove to be the panacea everyone thinks it will be; I am still looking for a recession or major slow down by late next year or early 2007, and a major market drop into October, 2006.

If I prove dead wrong, then I already have the theory of why "this time is different" and will post it!

-- posted by Normxxx

Top 866. Nov 20, 2005 1:01 PM

» Jas_Jain - Schumpeter’s Observations On Bankers, Debt, and the Real Estate

November 20,2005

Schumpeter’s Observations On Bankers, Debt, and the Real Estate Boom of 1920s and the Causes of the Great Depression

Before I comment on Bernanke and what lies ahead for the US economy I thought that it would be very instructive to review some of the comments of a great economist regarding the last war that the next US Economic General Bernanke has been selectively educated to fight.

Joseph Schumpeter was a very famous Moravian-born (Czech), Austrian-educated, American Nobel economist (Harvard University, 1932–50, until death) who had the fresh and real-time knowledge of the period preceding and during the Great Depression. Some, including myself, consider him as the greatest American economist. It is my belief that his descriptive commentaries relating to the Great Depression (that easily lead to where the finger should be pointed) have been willfully ignored.

When we compare the 1920s and 1930s to the 1990s and 2000s the sequence of important economic events might not be the same even if the general dynamics, as dictated by long-term cycles, are very similar. For example, the real estate bubble preceded the stock market bubble in the former period. If we take the two booms in each period together, regardless of their order, the period 1996-2005 is similar to the 1923-29 period. Again, the length of the period does not have to be exactly the same. What are remarkably similar are the economic behavior of the public and the various promoters, including the bankers, builders, retailers, corporations, Wall Street, etc.

It is not possible to cover everything that Schumpeter said on the said behavior, so I will limit to few important examples with quotes, from Business Cycles, and let you conclude if they sound only too familiar. Emphasis in all capitals is mine.

“It seemed more important to get the home one wanted …then to bother whether it would cost few thousands more [few 100Ks more in California in the past years] or less, provided that the money was readily forthcoming. And it was [!!]. First mortgages on urban real estate …also financed not only other types of building but other things than building. …The increase [in bank credit] …illustrates well how a cheap money policy may affect other sectors than those in which it is conspicuously successful in bringing down rates.”

“…But the conclusion that this essentially consequential development …[resulted] in overbuilding, owing to the additional stimulus imparted by the monetary factor, must not be accepted hastily, however plausible it may seem [one example of why Schumpeter thought that people are very eager to point to the Monetary Policy]. Some types of responses to those conditions, especially those that were linked to the speculative real estate operations, were clearly of bubble class [i.e., it was the bubble mentality and not the easy Monetary Policy that caused the overbuilding].

“…Finally, EVERYTHING WAS DONE TO MAKE IT EASY FOR EVERYONE TO RUN INTO DEBT, FOR THE PURPOSE OF BUILDING A HOME AS FOR ANY OTHER PURPOSE.”

“…In other words, we shall readily understand why THE LOAD OF DEBT SO LIGHTHEARTEDLY INCURRED BY PEOPLE WHO FORESAW NOTHING BUT BOOMS SHOULD BECOME A SERIOUS MATTER whenever incomes fell, and that construction would then CONTRIBUTE, directly and through the effects on the credit structure of IMPAIRED VALUES [read falling prices] OF REAL ESTATE, AS MUCH TO A DEPRESSION AS IT HAD CONTIBUTED TO THE PRECEDING BOOMS.”

The bottom line is that bubbles, or booms, have a mind of their own. Right conditions, psychological as well as economic, for booms don’t exist at all times. We have had real estate booms in the US when the Monetary Policy was not what one would call easy money. In 1993, when the Monetary Policy was very easy, and the mortgage rates came down substantially, there was not only no boom in Southern California housing, but rather a bust. Most importantly, depressions happen as a result of too much debt incurred by households, and sometimes by businesses, during the booms. Hence, the only way to avoid depressions is to check the booms, or the level of debt that leads to the booms, in the first place, something that Dr. Bernanke does not believe in.

One habit that I have formed is to re-read important works periodically (I re-read Adam Smith, Schumpeter, Tocqueville, etc., and the US Constitution, at least parts of them, once or more every year) because it is not possible to remember many important ideas, or facts. When I read Schumpeter in late 1990s I didn’t pay much attention to real estate’s contribution to the Great Depression. I was too focused on the stock market. Also, I didn’t grasp the role of the bankers, who behaved worse than the used car salesmen in pushing, or promoting, debt in turning what would have been a normal recession, otherwise, into a depression.

Schumpeter goes at length to impress that bankers need to be independent agents. But, he says that the temptation has been for bankers to control businesses and industries and for those who control businesses and industries to control banks. The situation that exists today, at least in the US, the bankers, financiers, and other businesses are all fully intertwined, i.e. anything but independent. If the real estate industry requires loose lending standards to boom, or extend the boom, as is the case now, bankers are more than happy to comply. He talks about the “intellectual and moral qualities not present in all people who take to the banking profession.” There are very few people these days that talk about the moral qualities of bankers, or any other economic ruling elite.

Then he goes on to explain the bankers’ role in creating economic turmoil: “One of the results of our historical sketch will, in fact, be that FAILURE OF THE BANKING COMMUNITY to function in the way required by the structure of the capitalistic machine ACCOUNTS FOR MOST OF THE EVENTS WHICH THE MAJORITY OF THE OBSERVERS WOULD CALL ‘CATASTROPTHES.’”

There is a reason why I refer to the big bankers of New York City as Bankrupters because their actions are certain to lead to future bankruptcies of tens of millions of American households. Not only these people lack moral qualities, they are born-and-bred financial bloodsuckers. When I see Sandy Weill on TV, I see Dracula! Mr. Weill recently claimed, “The balance sheets of the American consumer are exceedingly strong.” Talk about deception and lies, the tools of the trade for America’s biggest bankers and financiers. Mr. Weill seems bloodthirsty to suck the financial blood of few more millions of American households while he still has the opportunity to do it with impunity. Evil can exist in many forms and among ignorant people it can thrive. There is hardly any dispute that the so-called educated Americans are ignorant of history. An important historical knowledge that is lost to Americans is that the stock market is a substitute debt market and high enough dividends were the single best check on the Corporate Crooks.

In summary, if one reads the lively commentaries of Schumpeter regarding the 1920s it is clear that it was the certain conduct on the parts of bankers, financiers, and businessmen, in general, together with the gullibility of the public that gave rise to the booms, facilitated by Debt, which gave rise to the later depression. It was the household debt that made the depression of 1930s so much worse than the previous depressions. Whether a “correct” Monetary Policy would have made it less bad is inconsequential.

Jas

-- posted by Jas_Jain