Guest Post: $6.5 Trillion Lost, One House At A Time

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Tue, 05/10/2011 - 10:19 | 1259005 Life of Illusion
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Expect 5 more years of the same,,,debt deflation in slow motion as Ben prints and squatters scream for more free living.

Gov. housing program at expense of taxpayer and politically incorrect bond holders.

Tue, 05/10/2011 - 10:52 | 1259145 Mr Lennon Hendrix
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There are two housing markets.  One is the places where people can live and viably.  The other is where people will never want to live again.  The first is in upscale neighborhoods of cities and towns powered by hydroelectricity, the second is the places that are not sustainable.

The suburban experiment is over.  People will not be able to afford driving hours everyday.  People will not be able to afford to live in cities that power off of gas.  Cities that have no natural resources are soon to be, if they are not already, ghost towns.  Say good bye to Las Vegas, Phoenix, areas of Detroit, and swaths of suburbs in California.  These markets will bottom at zero.
Towns in the NE and NW that are powered off of hydro will bottom next year.  People will rush to live where energy from water is cheap.  They will power their electric cars with this "free" energy. 

These are the two housing markets, and the rift will seperate the lower class from the upper once and for all.

Tue, 05/10/2011 - 10:59 | 1259174 falak pema
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the trick is to have a house in each market and a separate wife to service it. That way you win both ways, as Oligarch and as plebe. Double helpings at reduced prices! The USA has never been so promising!

Tue, 05/10/2011 - 11:04 | 1259195 cossack55
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Thats some serious hedging. I like it.

Tue, 05/10/2011 - 11:06 | 1259188 Careless Whisper
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The analysis in this post is slightly flawed because the 2006 equity of $12 Trillion was never really "there". Alot of people acted as if it was there but it was all just a fantasy.

Tue, 05/10/2011 - 12:01 | 1259395 ghostfaceinvestah
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Exactly, in a lot of ways it was a paper loss.

Tue, 05/10/2011 - 14:12 | 1259818 csmith
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Not a paper loss at all. IF the banks had not been bailed out (which in turn bailed out depositors), then depositors would've seen real cash losses. Instead, we enact bailouts and suck the value out of the currency a little bit at a time over 20 years.

Tue, 05/10/2011 - 12:27 | 1259491 srelf
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Wealth did operate during the bubble as if real, but it was indeed unreal, regardless of what the National Association of Realtors was telling everyone.

Tue, 05/10/2011 - 11:21 | 1259257 Calculated_Risk
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Phoenix has nuke, hoover, and solar.

Tue, 05/10/2011 - 11:41 | 1259344 Mr Lennon Hendrix
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I am with you on two out of three, but nuclear has a negative EROEI when considering storage costs.  Long Phoenix?

Tue, 05/10/2011 - 11:40 | 1259327 malek
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"Powered by hydroelectricity?"

Which cities do fit the bill? Only Las Vegas comes to my mind...

Tue, 05/10/2011 - 11:45 | 1259356 Mr Lennon Hendrix
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Excuse this post (considering hydro), I used bad examples, as LV and Phoenix run off of hydro.  The Bonneville damn and Niagra should keep the NW and NE going, but not much of the country runs off of hydro...well, not enough to power all the suburbs and whatnot.  I think the south has very little hydro power.  I guess I should take "The Long Emergency" back off of the shelf....

Tue, 05/10/2011 - 10:52 | 1259139 trav7777
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The FRB is effectively "making the payment" on these to prevent the MBS and CDOs from collapsing.

The free availability of debt masked the fact that wages cannot keep up with prices the way that they have...this is a symptom of the hollowing out of the production base in the USA.

At some point, this trade deficit and all the rest of it must normalize.  People claiming that the Bernank is the cause are fools; the cause is the massive export of dollars for 40 years against massive imports of everything else.  Any other country without a petrodollar trying to do this would have seen immediate forex normalization.  In fact, during the 70s, the dollar was experiencing exactly that, inflation to its true comparative value.  The petrodollar recycling scheme merely delayed that.

Tue, 05/10/2011 - 10:43 | 1259100 Roy Bush
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And the most insidious part is that you have to pay taxes on the "gain" that didn't even keep up with inflation.

Tue, 05/10/2011 - 10:04 | 1258950 the not so migh...
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but the NRA states " Now is the perfect time to own a home"

Tue, 05/10/2011 - 10:27 | 1259030 tonyw
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"It is difficult to get a man to understand something when his salary depends on his not understanding it." Upton Sinclair

Tue, 05/10/2011 - 10:31 | 1259050 SheepDog-One
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The other NRA states 'Now is the perfect time to own a gun'

Tue, 05/10/2011 - 10:04 | 1258951 friendly manitoba
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tyler  -  how old are you  and is that your picture  ? 

also  i  think you work  too  hard  but i do appreciate your work - how many people does it take to keep this thing  rolling  -   thx 

Tue, 05/10/2011 - 10:06 | 1258962 narapoiddyslexia
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Sorry if I'm wrong to ask, but is this a joke? The pix is from Fight Club, the movie, starring Tyler Durden. Look it up.

Tue, 05/10/2011 - 10:15 | 1258993 idea_hamster
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* starring Brad Pitt in the role of TD

Tue, 05/10/2011 - 10:21 | 1259001 bob_dabolina
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Wait a minute. 

Brad Pitt is running ZH?

Tue, 05/10/2011 - 10:22 | 1259008 TheTmfreak
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Tue, 05/10/2011 - 10:25 | 1259031 Temporis
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When the hell do we start beating the crap out of each other?

I have anger issues and need to take it out on the random silver bashing trolls who frequent these boards any time there is a down tick.

Tue, 05/10/2011 - 10:50 | 1259128 Dixie Rect
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The first rule of Zero Hedge is you don't talk about Zero Hedge.

Tue, 05/10/2011 - 11:16 | 1259235 writingsonthewall
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So when does project mayhem start?

Tue, 05/10/2011 - 11:24 | 1259273 fuu
fuu's picture

You missed that wagon a year or so ago.

Tue, 05/10/2011 - 11:28 | 1259279 TheTmfreak
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Is that similar to actions being taken on silver?

Tue, 05/10/2011 - 11:53 | 1259377 baby_BLYTHE
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Tyler is hot and so is ZH!

Tue, 05/10/2011 - 12:10 | 1259429 Abitdodgie
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I bet you say that to all the guys

Tue, 05/10/2011 - 10:12 | 1258969 Sudden Debt
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5 hamsters to take care of the needed electricity (once a month they get a 1 hour brake and than the servers go offline)

1 FED guy to fuck things up so there's a constant feed of newstopics

1 US PRESIDENT to CHANGE to constitution, bill of rights and your ways of living

and Tyler who goes all PAPARAZI on them :)



Tue, 05/10/2011 - 10:17 | 1258997 depression
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Don't forget the 100's of brilliant commenters that snip and parse every word said along the way.

Tue, 05/10/2011 - 10:07 | 1258959 Sudden Debt
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Who would have guessed prices of CARD BOARD BOXES with drywall finishings to drop to a level of ONLY +500% of it's intrensic value?!


The average RAW MATERIAL VALUE of a house is still worth 6200$ so whatever happens, prices shouldn't drop below that level.


Tue, 05/10/2011 - 10:12 | 1258975 narapoiddyslexia
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And, as some folks always note, silver only costs $5/oz to mine. Thus, a house is worth at least 1240 ounces of silver! The American Dream.

Tue, 05/10/2011 - 10:17 | 1258987 TheTmfreak
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Which one do you think is more difficult and riskier of an action to do?

How about which one requires more specialized labor that you can't learn "tinkering in the garage"?

People are constantly proving that "any bum" can do it when it comes to building a house (and for alot cheaper).

Tue, 05/10/2011 - 10:21 | 1259002 narapoiddyslexia
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I pick mining. As a geologist who's built a house, I choose to never enter underground mines, but I live in my house. I stash my silver in bank deposit boxes, though, because I seriously doubt the government will seize it. Too many rich people, i.e., the owners of the government, own prescious metals. But to your point, I was being sarcastic. Just not very well.

Tue, 05/10/2011 - 10:24 | 1259017 TheTmfreak
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Geology eh? I minored (har har har) in it, and my girlfriend is getting her masters in it at the moment. Even though I make quite a bit of money eventually I'm "going galt" to start an organic self-sustaining farm, while I lush off of her career.

Oil wealth bitchez!

Tue, 05/10/2011 - 10:40 | 1259085 narapoiddyslexia
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I also got an MS in geology, long ago, and when I graduated from school, oil was $11 a barrel and 65% of the geotechnical workforce was unemployed. That was long ago, indeed. Guys who built houses got rich while I spent two years looking for work.

Back then, houses were a good deal. Not so much anymore.

Tue, 05/10/2011 - 11:27 | 1259276 TheTmfreak
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Times certainly have changed. While at Virginia Tech it was common knowledge that Geophysics MS students would be employed with starting salary of around 120k for their first year.

My girlfriend is doing an internship this summer with Cheveron making 6k a month. For an internship...

Tue, 05/10/2011 - 10:22 | 1259009 Sudden Debt
Sudden Debt's picture

It's really not that hard to build a house yourself.

Just follow the IKEA instructions:


Here's another one:


Tue, 05/10/2011 - 10:11 | 1258965 depression
depression's picture

I wonder what all those house price numbers look like when priced in real money ?

Tue, 05/10/2011 - 10:10 | 1258966 sharkbait
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Inflation forces everyone to become a speculator.  Either you speculate in ways to keep pace with inflation or you speculate in how long it will be before your financial assets ( savings ) are wiped out.

It is wrong to inherently punish the risk averse savers.  Their willingness to accept lower returns should not be compounded by debasing the unit of measure of their holdings.

Tue, 05/10/2011 - 10:40 | 1259096 Alex Kintner
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Savers and people on fixed incomes are very Patriotic at the moment. Their wealth (or survival fund as the case may be) is being transferred to Bernanke with each push of his Q-Easy button. I salute their patriotism and hope they land a prized location in their local Hooverville once the dollar sinks to zero. (snark for those who didn't figure it out)

As for your ZH Id, I do not appreciate the sentiment. Good day to you sir!

Tue, 05/10/2011 - 10:08 | 1258967 fbrothers
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taxee taking a hit too.

Tue, 05/10/2011 - 10:47 | 1259117 serotonindumptruck
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True that. Many counties and municipalities refuse to adjust assessed values to reflect home price depreciation.

Tue, 05/10/2011 - 11:15 | 1259226 sun tzu
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My county tax assessor increased the value of my home. They needed more taxes

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