If You Are Considering Buying A House, Read This First

Tyler Durden's picture

In September of 2011, when looking at the insurmountable debt catastrophe that the world finds itself (which has only gotten worse in the past several years) we warned that "the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world's financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path."

Two years later, the financial asset tax approach, in the form of depositor bail-ins, was tried - successfully (as there was no mass rioting, no revolution, in fact the people were perfectly happy to accept the confiscation of their savings) - in Cyprus, further emboldening the status quo, in this case the IMF, to propose, tongue in cheek, that the time has come for the uber-wealthy to give back some ("it's only fair"), and to raise income taxes through the roof (which of course would mostly impact the middle class as the bulk of current income for the 1% is in the form of dividend income, ultra-cheap leverage extraction on assets and various forms of carried interest).

And now, a new tax is not only on the horizon but coming fast and furious to allow the insolvent global regime at least one more can kicking: one which will impact current and future homeowners across the world.

But first, let's step back.

Last week, the IMF did what only the IMF could do: come to the realization that we proposed in 2009, and even the Davosites discussed earlier this year: namely that the middle class is effectively an endangered species, and rapidly on its way to wholesale extinction, and that the polarity between the rich and poor has never been greater. The IMF concluded, with the panache that only this comical organization is capable of, that income inequality "is weighing on global economic growth and fueling political instability."

The WSJ reports:

The International Monetary Fund's latest salvo came Thursday in a top official's speech and a 67-page paper detailing how the IMF's 188 member countries can use tax policy and targeted public spending to stem a rising disparity between haves and have-nots.


IMF Managing Director Christine Lagarde has made the issue a high priority for the fund, warning—along with some of the fund's most powerful shareholders—that inequality is threatening longer-run economic prospects. Last month, Ms. Lagarde said the income gap risked creating "an economy of exclusion, and a wasteland of discarded potential" and rending "the precious fabric that holds our society together."

The IMF's solution? The same as that of socialists everywhere: redistribute the wealth... because apparently socialism works every time, all the time, with stellar results.

"Redistribution can help support growth because it reduces inequality," David Lipton, the fund's No. 2 official and a former senior White House aide, said in a speech Thursday at the Peterson Institute for International Economics. "But if misconceived, this trade-off can be very costly."


"There's a sense that the burdens of the crisis have been unevenly distributed, that the middle classes and the poor have footed more of the bill of the crisis than the economic elite," said Moisés Naím, a senior economist at the Carnegie Endowment for International Peace and Venezuela's former trade minister.

Oh is there a sense? Is that why the Fed has halted its QE program which takes from what little is left of the middle class and gives to those who already have more money than they can spend in several lifetimes. Guess not.

So how does the IMF suggest going about this wholesale, global socialist revolution? Simple: the way we explained nearly three years ago.

The IMF's latest paper doesn't prescribe country-specific measures, but it does offer several proposals that are likely to be controversial. Most notably, the IMF says many advanced and developing economies can narrow inequality by more aggressively applying property taxes and "progressive" personal income taxes that rise as incomes increase.


The median top personal income-tax rate across the globe has halved since the 1980s to around 30%. But the IMF says "revenue-maximizing [personal income tax] rates are probably somewhere between 50% and 60% and optimal rates probably somewhat lower than that."

We wouldn't be too concerned about income taxes. After all, one needs to have a job to have income, and as everyone knows by now, jobs also are on their way to extinction, and every central bank everywhere will merely print the money needed to cover the income tax shortfall, leading to that "other" alternative to fixing the debt problem: global hyperinflation (with a little precious metals confiscation on the side: just like FDR did in the 1930s).

But going back to the original point, here is why those in the market for a house should be worried. Very worried. From page 40 of the IMF's paper on "Fiscal Policy and Income Inequality":

Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation. Wealth taxes, of various kinds, target the same underlying base as capital income taxes, namely assets. They could thus be considered as a potential source of progressive taxation, especially where taxes on capital incomes (including on real estate) are low or largely evaded. There are different types of wealth taxes, such as recurrent taxes on property or net wealth, transaction taxes, and inheritance and gift taxes. Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.

  • Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).

And there you have it: if you are buying a house, enjoy the low mortgage (for now... and don't forget - if and when the time comes to sell, the buyer better be able to afford your selling price and the monthly mortgage payment should the 30 Year mortgage rise from the current 4.2% to 6%, 7% or much higher, which all those who forecast an improving economy hope happens), but what will really determine the affordability of that piece of property you have your eyes set on, are the property taxes.

Because they are about to skyrocket.

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Manthong's picture

If you own property in or near a large metro in the US, you are the target.

My property tax exceeds any mortgage payment I have ever had (reasonably nice older property, but no mansion).

This is now a temporary residence and state for me.

WayBehind's picture

Well, bad news for my tenants. The higher property tax will come out of their packets. You tax us = they pay. Lets call it wealth re-distribution.

SafelyGraze's picture

step 1: raise tax rate to 70% on the few who make more than 250k

step 2: wage inflation! every employee starts making more than 250k

step 3: 401k has performed *fantastically* well .. so retirees are making more than 250k

problem solved

Anusocracy's picture

"fucking thieves"

That's one of the problems: they reproduce.

G-R-U-N-T's picture

"and every central bank everywhere will merely print the money needed to cover the income tax shortfall, leading to that "other" alternative to fixing the debt problem: global hyperinflation (with a little precious metals confiscation on the side: just like FDR did in the 1930s)."

Wrong, twill be 'deflation' that kills the beast, however much of your impressions I agree with!

TruthInSunshine's picture

I have clients who are white collar slaves. They are killing themselves working 60 to 70 hour work weeks (each) in their late 30s and early 40s making a combined income of 180k to 250k, 35% to 40% of which then goes to pay federal and state income taxes, and then there's the consumption taxes on all that they purchase...from the pianos to the Porsches...

...and then there's the 12k just in property taxes on that cheaply built 3,600 square foot McMansion (made of 1 5/8"x 3 1/2" studs & builder grade cheap ass windows) that they "had to have" for fear of being ostracized in their circle of fake friends.

And they wonder why they can't save any money, have enormous credit card bills, and are constantly tempted to dip into their IRAs/401ks...

The saddest part is they are almost universally miserable in their quest to work themselves to death at kind they despise to accumulate shit that not only brings them no lasting pleasure, but complicates their lives and keeps them as hamster debt slates running furiously on that big wheel of debt in their cages.

I have 1/2 to 1/4 the possessions they do (being things of true and lasting high quality that I own because of true passions, not peer pressure, that I will pass down to my children, most of which are of such high quality that they will pass down to their children), have a far higher net worth (0 debt and a large pool of liquid savings) than they most likely ever will, I love my vocation, and I don't wake up bemoaning my life each morning stressing the fear of what lay ahead every day as they do - and I'm their age or slightly younger.

They are killing themselves in a myriad of ways, physically, spiritually & emotionally, to live lives of cheap & hollow existence, to support the decaying system - to help keep it propped up, and to enrich people who despise them and their children.

It's so incredibly ironic.

FredFlintstone's picture

Preach it, brother. Once I was lost...

Richard Chesler's picture

Make that 44.7 fucking percent.

Fucking thieves is right.


Ray1968's picture

Folks in Northern Illinois are just going to burn down their houses. You can't tax our property any more than it is now. It is getting ridiculous.

DontGive's picture

That would be great if they leveled out the housing supply a little. Should be favorable for our real estate holdings!

All kidding aside. Not gonna happen without putting a lot more stress on the general market. Renters gotta live some where. Those rentals are owned by someone. If the fundamentals don't work, I'm going to just tell you right now that if you think the landlord will keep a property long term and lose money, you're fooling yourselves. Unless you float a portfolio, and take that cash from the muppets and sell out right before cashflow becomes a problem, then maybe the Tylers will write about you someday here on ZH.

Unless we start turning the housing supply into common housing for the slaves. By then, we will be - use your creative imagination here..

chumbawamba's picture

Here's the best part:

...although effective implementation will require a sizable investment in administrative infrastructure."

Right.  Pass legislation to create the bureauracy and then bill the taxpayers to pay for it.

Slaves on a plantation.

I am Chumbawamba.

blindman's picture

the money system was implemented to replace
the human chattel system and it worked.
when people understand that, and a few other
important principles and live by them, then
everything is gonna be all right. ...al green
money as debt at interest compounded in a fractional
reserve ponzi power scheme doesn't work?
who would have guessed integrity problems would develop
in such a system? sheesh ..
Al Green - A Change Is Gonna Come

blindman's picture

fraudulent induction of debt as money is worse than
worthless, it leads to "worsity"^tm-pjb.
Take Me to the River - Al Green

Offthebeach's picture

What I see.

Walks at night, plenty of unoccupied houses. Many bank owned for 4+ years. Inspection notices on windows. Also, old retired folks crushed. Their house well kept, but dark early at night, save maybe a TV.
Common multi genational living by working class.
People putting unpermitted walk out basement apparments, above garage, even doen Because Bil-Co basement steps. I ve seen illegal appartment in small strip mall shops. Renting parking space and power for old Winnebagos. Last week a article in the Boston Globe of boat live aboards.

I think that housing is continuing to be pressured for the sub 1%.

UselessEater's picture

and these decent hard working folk are the least likely to take anything written by the IMF, UN Ag21, BIS, FSB etc etc seriously - they are earnestly struggling to prove a (historical) point of self-worth and self-reliance that is being woven into a web of debt-control laden with new tax burdens. At some point people have to separate their self worth from a paradigm designed to increase future debt and tax obligations. Decent non-violent people are being drawn very slolwy into the dramatic EU riot situation so slowly the drama will unfold without the riots. Instead it is just a quite increasing suffering by those who are too proud to show their suffering, we know this because the EU has been a test case -not one protest or riot has reversed or slowed the globalist agenda.


TruthInSunshine's picture

Debt is the currency of slaves, and that's how TPTB have kept production of first that powers their mills at necessary levels - marketing, advertising deception, (think DeBeers as a classic example of a masterstroke of this technique), and the selling of a dream that a) exceedingly few will ever achieve even as it is falsely portrayed, b) despite this, work themselves into decay to try to reach for it, ruining their lives & relationships in the process, and c) even for the exceedingly few who "capture" the dream as marketed, find that it's devoid of any true substance that is able to provide them true happiness, wisdom or spiritual nourishment.

It may be easier to discover and hone one's passions with financial wealth, but the attainment of financial wealth won't guarantee this or any level of happiness without a solid existing foundation.

The ultimate tragedy is that so many become debt slaves, forever, in pursuit of what is the wrong "dream," and not even that which is their true dream ( the one that is marketed & astroturfed in such sophisticated ways).

maskone909's picture

Nicely put. Reminds me alot of goodwill huntings job interview with the nsa.

I think i am going to buy a ducati 1199. I am going to hit the road and never look back! Sick of this truman show/matrix

European American's picture

From personal experience, not the bike to hit the road with (unless you want to make a quick get away). Better off, in comfort, with a BMW 1200 GS Adventure. More optionis that way.

UselessEater's picture

TIS... debt seems to be a recent generation thing - look at international H/H debt charts and most seem to take off almsot vertically in the 90's.

How did this get so universal?

moonshadow's picture

@TIS: and just what IS that 'solid existing foundation' for you? finish...

TruthInSunshine's picture

It's subjective. Most people only have a few or maybe even only one
true passion in life.

The significance is that regardless as to whether one's passion(s) is/are rebuilding a particular type of motor, chess, a charitable cause, hunting, philosophy, medicine, engineering or farming, it stems from an inner, deep love of something that is innate and brings an individual true satisfaction.

My point is that being a debt slave, due to societal pressure & the chicanery of marketing "professionals," working in a field and/or at a job that one despises (with people they dislike), in a quest of accumulating a large quantity of useless things, that bear no nexus to one's passions, and to support the decaying system in doing so, not only helps keep a sick system propped up, and enriches people who despise them and their children (thus being ultimately & sadly ironic) -

- but it ALSO - on top of that - hinders the pursuit of one's true passion(s).

logicalman's picture

I don't own a car. I cycle - I'm good for 30 miles on just about any day of the year and often do 50.

On my way into work, I am often passed by a guy in a fancy Mercedes. I was next to him at the lights a couple of weeks ago.

He looked at me in a way that suggested he felt rather superior to me (it was -30º). I looked back with a similar expression.

He probably thinks he is better than me, because he 'owns' a Merc. I think I'm doing better than he is for the same reason.

TruthInSunshine's picture

No to mention, what is the state of your cardiovascular health versus his?

He now has to go out of his way to find extra time to dedicate to "work out" just to try and hope to come close to your likely physical health superiority.

It's statistically more likely he pops lipitor in the false belief that cholesterol levels, rather than sedentary lifestyle, cortisol & stress, cause inflammatory disease of the cardiovascular system - all on the advice & prescription pad of an "educated," licensed (co-opted & compromised) physician.

logicalman's picture

I'll be 60 next year.

Cholesterol level, last checked, was about perfect.

Blood pressure, to quote my doc, not seen that low very often in someone standing up.

No meds.

But for me, it's about life - I'll take quality over quantity.


FredFlintstone's picture

Good for you. You are a wiser man. Some day it may dawn on that guy. Second wife cleans him out, his kids hate him... one day he may think of you in a quiet moment and may be inspired to change his life.

ChanceIs's picture

I love my Mercedes.  It's a 1995 E300 doesel.  Gets 37 mpg on the highway crusing at 65 mph with the AC on.  I am rather POed right now because the AC is out and it costs about $3K to tear the dash apart and replace the evaporator.  It probably isn't worth it, so I might have to go get a new(er) car.  Why am I POed?  Because it is only 19 years old and has only 198K miles.  I sold my previous one when it had 340K miles on it.

Mind you, I would never buy a new Mercedes.  They are in the mode now of adding worthless computer gadgets which break and cost a fortune to fix.

IMO one isn't showing so much smarts unless you drive old Mercedes diesels.

I don't know about bucycling.  Ages ago I used to do it to get to wrok just to get my exercise - had nothing to do with being green.  Around Washington DC, one can actually get places faster than by using a car.  The suit culture in Washington is slowing morphing into the sweaty bicycler look.  But time is money, and if you can get there fasster and safr in a car, you should do it.  Something about Adam Smith's division of labor.

FredFlintstone's picture

It is conditioning. My formative years were during the Reagan "Revolution". All of us go-getters were going to graduate from college, make our fortunes, marry the trophy and then play golf at age 50 until we died. That was the "dream".

The conditioning comes from all around: family, friends, school, government, media of course.

Some of us woke up others are still going at it. I have been fortunate enough to be able to play golf hours and days on end at a relatively young age. It gets boring real quick. I have seen guys on the course that have worked their entire lives for that day. 65 years wasted in pursuit of a hazy dream, not well-thought out.

Some dream of that beach house or convertible. Again I have been fortunate enough to enjoy a convertible and a house near the beach. None of it is worth having the nose to the grind stone for 65 or even 55 years. As for the trophy wife thing, I don't even enjoy sex that much anymore. I am not even 50 yet.

Solomon I think or maybe David who wrote many of the proverbs or Ecclesiates? Nothing new under the sun? Not a lot to live for if you are pusuing material things.

free_lunch's picture

You people are the reason i visit ZH. Reading your comments helps me to maintain my psychological health. Sadly the bulk of the people i"m surrounded with professionally and socially are part of the brainless sheep who's horizon is limited to sports, drinking and accumulating useless stuff to impress others with.

When i visit ZH and read the comments it makes me feel less mentally isolated. Sadly we are surrounded by a majority of superficial arrogant narcists with a lack of moral and ethical principles priciples. I often ask myself what the f**k i am doing here in this crazy rotten world.

I was teached as a kid, that honesty and kindness will be rewarded, while thieves and lyers would be punished.

Man what a shock growing up was for me.. Finding out the world works just the other way arround. The bigger the crook, the greater the reward. People actually worship lyers and thieves while they laugh with honest people that actually have some principles.

But i still live following the principle of my childhood, because it's the only way i can live with myself.

I've taken a few IQ test in my teens that showed that my IQ was a bit higher then average. Later on i realized that this was the explaination for the strange feeling of not fitting in, i had as a kid/teen. I don't have any feelings of superiority to other people less gifted, but i just don't share their (in my view) superficial intrests. Visiting ZH and reading your thoughts is like charging my batteries. It doesn't change the real world, but it makes it a little easier to bear. Trouble shared is trouble halved..


fockewulf190's picture

$1.2 trillion in student debt just within the USA alone.  Fiscal slavery has become the new form of concentration camp. "Arbeit Macht Frei" was a joke back in the 40´s, and is just as much of a joke today, only today you no longer need the physical fences, barbed wire and guards to get the prisoners to work themselves to death.  The power of the pen has become way more powerful than the MP-40 ever was.

daveO's picture

'Work Makes You Free' was officially replaced by 'Debt makes You Happy' in 1971. Ask any Baby Boomer, they'll tell you.

Element's picture

Somehow even zero hedge seems to have forgotten that these IMF officials pay no taxes.

Yet all they do is tell impoverished people how they have to pay expanded taxes, to help the poor banksters.

Now I'm not an advocate of violent revolutions, but if someone ever, you know, got one of those vile hypocritical parasitic vermin in their sights at some point, I'd sorta understand if you suffered a sudden sneezing fit, and accidentally blew a fair sized chunk out of the side of their head.


Hey, it happens.

logicalman's picture

They know this.....

Hence gun control.

FreedomGuy's picture

Herein lies the potential problem. If they say "Screw it!" and go to lower income levels the government loses. They move to lower tax brackets or even become a net tax loss in the extreme. The higher the taxes the more likely that becomes. This is why heavily redistributed economies fail in short order and black markets arise in the same places.

I personally am considering a similar downsizing path. First, it can kill you over time and second it frees you from many of the government chains.

Only proles are free.

FredFlintstone's picture

I made one shift down at age 46. Took a cut in pay equal to what the median family makes in a year. Looking to make another big drop once the rest of my kids get out of college. Don't notice it since there are less taxes to pay.

Work your azz off for some colored paper. Are we all insane or what?

RafterManFMJ's picture


...and when the time comes for University - ooooh, sorry you don't qualify for any aid, please pay retail while you subsidize young Shaquuena, who gets a free ride.

It's hilarious the dullards cannot see just how much of a milch cow they are, and they pay from every angle.

Me, I live in a 1921 brick on cut stone Victorian with oak floors that you couldn't build today because the craftsmen no longer exist.

Beveled glass, pocket doors, ornate woodwork...and an all in cost (taxes,mort,insurance) about 7% of my monthly gross.

Da wife gets to stay home all '50s style - the only one of my circle of friends to do so; the rest have big houses, fancy cars, big student loans.

My goal is to live so far below my means I need a periscope to find my way to my car in the morning.

Squid-puppets a-go-go's picture

I too downsized.

gave up the 9 to 5, sold my house , out of debt and put the equity into preshymetlz.

happier by day and sleeping better by nite



DaveA's picture

How much time does a man have for shopping when he works 60-70 hours a week? If you know a man who earns 200k but can't make ends meet, he may have a spending problem, but it's more likely that his wife has a spending problem. And if he dumps her, he'll be working 90 hours a week to pay the alimony she needs to "maintain the lifestyle to which she has become accustomed."

logicalman's picture

Is that the voice of experience?!

Kprime's picture

No income, no bank, no cell phone. No house payment. No rent. no car payment. no debt. 3 years now.


Watching the Wheels

Album Double Fantasy released in 1980.


People say I'm crazy doing what I'm doing

Well they give me all kinds of warnings to save me from ruin

When I say that I'm o.k. well they look at me kind of strange

Surely you're not happy now you no longer play the game


People say I'm lazy dreaming my life away

Well they give me all kinds of advice designed to enlighten me

When I tell them that I'm doing fine watching shadows on the wall

Don't you miss the big time boy you're no longer on the ball


I'm just sitting here watching the wheels go round and round

I really love to watch them roll

No longer riding on the merry-go-round

I just had to let it go


Ah, people asking questions lost in confusion

Well I tell them there's no problem, only solutions

Well they shake their heads and they look at me as if I've lost my mind

I tell them there's no hurry

I'm just sitting here doing time


I'm just sitting here watching the wheels go round and round

I really love to watch them roll

No longer riding on the merry-go-round

I just had to let it go

I just had to let it go

I just had to let it go

merizobeach's picture

Good for you, bro, and thanks for the Lennon.

Wile-E-Coyote's picture

They are killing themselves in a myriad of ways, physically, spiritually & emotionally, to live lives of cheap & hollow existence, to support the decaying system - to help keep it propped up, and to enrich people who despise them and their children.

Couldn't agree more. Fuckem, I have no sympathy for them. When this system collapses they will be the last to know and the first to lose everything.

I know somone who I grew up with who was a good person, he suddenly changed disowned all his old friends, changed his accent, created a new past for himself. He is on the hamster wheel at full tilt. From what I can gather he is miserable and unfullfilled. Maybe one day he will realise what has true value; family, health and good friends. Everything else is BS.

Graph's picture

2008 crash was a blessing for me and the the great beginig of new life that I enjoy now.

In my early years in US, I worked a second job to clean some of the cards the we had and to save for our first home downpayment. I was given an office key as work was over the week ends. Not once, late at Saturday nights I would walk to my modest Honda and next to it was allways parked a Porche and it's owner, young cocky guy, was still working. For him it was, apparantly, a life style.

Now...later I too fell for "hard work" mantra. Nothing wrong with that, up to the point,  other that all that one worked for can be taken away with managed machinations of the elite on one side.

On the other side: How much of one's life energy and is it worth on grand scheme, just to have, say, all maintaned by somebody else perfectly manicured lawn and sparkling pool?


TruthInSunshine's picture

Hard "work" in the true pursuit of something that one loves, and is value-additive to one's life, is a blessing.

Hard work in the pursuit of empty things & useless vessels, in a sad attempt to earn the false admiration & meaningless platitudes of a fickle & shallow circle of "friends" and the fleeting & even more empty, collective expectations of an advertising-conditioned society, is a curse.

Graph's picture

My "hard work" was dedicatedto exactly to that "quality" part. Bit out of topic, I allways wondered that guy from the "Pawn Shop" NEVER bought anything for himself and just because he simply loved it. Every time it was a purchase to make a buck.

Once when you realise that owning your own home is pointless in current situation purchases of any things, no matter how meaningfull in ones life became pintless as well.

My talk to circle of some people that I know that they should not be happy that they refinaced and, thus "saved" their homes - for the exactly same reason that blog above states fell on dead eras

logicalman's picture

Excellent summation.

I'm in a very similar situation and have some of those 'posessions of lasting quality' from previous generations that will likely get passed on again.

I don't own a debt-mobile, a TV, a cell phone or a credit card.

I don't buy cheap shit I don't need.

I do a job I'd do for free, if I could afford to.

I'd be fine, if we could just get rid of predatory government.