tag:blogger.com,1999:blog-913439.post2858367632826559176..comments2024-02-26T11:30:05.072-08:00Comments on winterspeak.com: Where inflations expectation is not nonsensewinterspeakhttp://www.blogger.com/profile/13611241702356475764noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-913439.post-59156991113875398682011-03-19T23:48:04.518-07:002011-03-19T23:48:04.518-07:00"Someone who has decided to buy a house may v..."Someone who has decided to buy a house may very well decide to take on more leverage, and buy more house than they otherwise would, if they expected inflation. Real estate is about the only highly leveraged position a household can take, and I can see it being very interest rate sensitive."<br /><br />THAT is precisely the trap of Real Estate, you leverage yourself to buy it to the point you wld not if you thought it was as depreciable an item as a car is, or an asset that can also lose value like a stock or ETF can. All hell breaks lose when the "inflation expectation" turns out to be wrong and it was the basis on which the private economy expanded itself. "Real Estate IS the Business Cycle" IMO is a true yet misleading diction. The more appropriate shld be "Real Estate has been the Business Cycle" to take out any implication of naturalness or inevitability from it. Economic expansion Doesn't HAVE TO be built on Real Estate speculation.Ohm (Ώ)https://www.blogger.com/profile/14090654932133115900noreply@blogger.comtag:blogger.com,1999:blog-913439.post-62132236938955954142011-01-10T20:33:53.227-08:002011-01-10T20:33:53.227-08:00Hey Winterspeak,
I have commented on UR at variou...Hey Winterspeak,<br /><br />I have commented on UR at various points. I've also commented here, and we had an email thread a while ago under my real name (Devin Finbarr is my internet pen name).Devin Finbarrhttps://www.blogger.com/profile/16051080456050760696noreply@blogger.comtag:blogger.com,1999:blog-913439.post-39161669660742445332010-12-30T21:25:44.934-08:002010-12-30T21:25:44.934-08:00Rajiv: Excellent -- thank you! I kept googling &qu...Rajiv: Excellent -- thank you! I kept googling "Lerner" and didn't find anything. <br /><br />Devin: Welcome! Didn't I read you over a unqualified reservations once upon a time?winterspeakhttps://www.blogger.com/profile/13611241702356475764noreply@blogger.comtag:blogger.com,1999:blog-913439.post-42148389709225507102010-12-30T19:47:43.466-08:002010-12-30T19:47:43.466-08:00I think the paper you have in mind is "Housin...I think the paper you have in mind is "Housing IS the Business Cycle" by Ed Leamer:<br /><br /><a href="http://www.nber.org/papers/w13428" rel="nofollow">www.nber.org/papers/w13428</a>Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-913439.post-36245330378599044212010-12-29T18:49:55.789-08:002010-12-29T18:49:55.789-08:00To some extent equity markets have the same dynami...To some extent equity markets have the same dynamic. If interest rates are low and inflation expectations high, I am likely to move my funds from dollars and bonds to the stock market. As more people do this, the stock market rises, and that can create wealth effect consumer spending. <br /><br />Also, corporations are themselves borrowing to buy back their own stock and to invest. I work for a software startup, but we're actually thinking of doing a debt round instead of taking more venture capital money, because the interest rates are so low.<br /><br />That said, the overall impact from the above effects are not that large and they are slow to act. Furthermore, it creates more leverage and contributes to making the economy cyclical. A tax holiday or mailing everyone a check for ten grand is a much faster way to stimulate the economy, and will result in reducing debt and leverage.<br /><br />BTW, I recently posted my own thoughts on the economy and economic policy on my blog. See my posts <a href="http://intellectual-detox.com/assorted-thoughts-on-the-economy/" rel="nofollow">Assorted Thoughts on the Economy</a> and <a href="http://intellectual-detox.com/how-to-reform-the-banking-system/" rel="nofollow">How to Reform the Banking System</a>. I'd love to hear what you think. You may recognize some MMT ideas, but there should be some unique ideas for you to noodle on. If any other commenters that area reading this are interested, I'd love to hear your thoughts too.Devin Finbarrhttps://www.blogger.com/profile/16051080456050760696noreply@blogger.com