Nothing Against the Old
We would like to preface today’s Diary with a clarification: We don’t have anything against old people. We don’t have anything against high GDP growth rates either. But the two don’t go together.
Some of this opinion comes from looking in the mirror: New products? New technology? New businesses? The older we get the less interest we have. When we learn a “new” song on the guitar, for example, it is likely to be one written half a century ago.
When we sit down to watch a movie, we’re as likely to pick out something from Leslie Nielsen’s Naked Gun series as a new Hollywood release. There are different stages in life… with different interests. One dear reader explains it:
In India there is a concept of Vrana ashram. In it, a person’s life is divided in four parts. From birth until 25, it is Brahmacharya – a person should gain knowledge by reading scriptures. From 25 to 50, it is Grihastha ashram – to live married life. From 50 to 75, it Vanaprastha – away from society in the forest seeking god. From 75 to 100, it is Sannays – complete renouncing of the world.”
We guess we are in the Vanaprastha stage. Maybe that’s what we’re really doing out on this remote ranch high in the Argentine Andes: seeking god.
Vanaprastha activities in the temple.
Photo credit: Kauai’s Hindu Monastery
Keeping the Money Spinning
Is there anything wrong with that? Not that we know of. But it is not the way to boost GDP.´One reader pointed out that the problem is not too many old people. It’s too few young people.
He has a point: More young people would be buying more new gadgets and gizmos… starting new businesses… buying houses and trading up… and generally helping to keep the money spinning. But why do we care if the money spins? Why can’t it stay still?
Ah, there’s an even better question: Is a higher GDP better than a lower one? Not necessarily. We’d be just as happy to see things slow down a bit. But that’s geezer talk, isn’t it? So, let’s move on…
Nothing much happened in the markets On Thursday. Still, things got weirder and weirder. Things that should cost something are going for nothing. Things that are essentially worthless – such as shares of companies that make no money – are selling for fortunes. Why? Because, if you can borrow a billion dollars and the bank pays you to take it… how much is that money really worth?
Whaddaya mean “worthless”? After reporting that it had earned less than half than expected last quarter, shares of NFLX soared by nearly $70 anyway, on account of “strong subscriber growth”. It seems the growth in subscribers is translating into earning less rather than more, but who cares? Valuation by “eyeballs” is back! – click to enlarge.
Free Houses!
Yesterday, we were flummoxed. Today, after fasting and prayer, we are as confused as ever. In Europe, mortgage rates are frequently floating… and frequently, the sea they float upon is one that goes up and down with short-term interest rates. Those rates are sinking so low that some homeowners are getting their houses for practically nothing.
Let’s say you buy a house for $1 million. And let’s say you borrow for the purchase at an interest rate pegged to the European one-month interbank lending rate. Depending on the spread, you are likely paying mortgage interest of around $250 a month. So how much is that house really worth?
In Europe, some banks now have to pay an interest penalty to mortgage borrowers whose loans are tied to EURIBOR. This is a result of the ECB’s market manipulations having dragged EURIBOR rates into negative territory. Yes, that’s going to end well! “One time!”, as poker players are fond of saying when facing a coin flip all-in – click to enlarge.
Is it worth $250 a month – about the same as a room in a rundown slum house in Baltimore – or is it really worth a million bucks? The New York Times has a report about people who are getting their houses for free. What’s the angle? They just don’t pay for them. Here’s the NYT with the report:
“There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.
However, in a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions.”
But getting a house for free is small potatoes. How about getting $2.5 trillion for free? That’s the amount of US Treasury debt the Fed has bought. (The rest of its QE loot went into government-backed mortgage bonds.) Okay, the banks owned it. Now the Fed owns it. Big deal?
Yes, a big deal, because when the Fed owns these bonds, it pays the Department of the Treasury back the interest due on these bonds. In other words, the interest cost to the government is zero from the time the Fed hoovers up its bonds. And what about the principal?
The Fed uses that to buy more government bonds to maintain the size of its balance sheet. Effectively, the principal the government owes on its bonds goes with the souls of the dead to a world we the living can never enter. The point is clear: The government got $2.5 trillion for nothing. But the meaning of it?
Impenetrable.
Dire Straits: Money for nothin’: “That ain’t workin’, that’s the way you do it, get your money for nothin’, get your chicks for free” – and your houses too!
An Indian swami, seeking God in the shrubbery
Photo credit: Riaz Padamsee
Image captions by PT
Charts by: StockCharts, Wall Street Journal
The above article originally appeared as “How to Not Pay Your Mortgage … and Get Away With It” at the Diary of a Rogue Economist originally written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.
Instead, we’ve made 6 more years of payments on a bloated mortgage, that we can’t even refinance because nobody has the actually paperwork. I kid you not.
Anyway, perfect, more bloated paper values, more bad loans, less income and revision to mean is usually an overshooting bitch. This is going to end well.
Nobody really cares, or understands, or wants to. They’ll use the outs of God/Government will provide, or “I was publicly educated, I can’t think and won’t try.”
I hate the words “can’t” and “won’t,” though they are very rarely absolute truth, but they are universally used as a justification for being lazy or afraid.
Those words shed near immediate light that I had royally screwed up in this marriage. We bought a HUGE fixer upper, with a huge yard and 15 “mature” shade trees.
I was pregnant, and hurling everyday, and when I stated, “we need to get the leaves to the road before next Tuesday,” I was answered with, “I won’t rake leaves.”
And he didn’t. I spent four days raking and puking into the leaves because it had to be done.
I wish that were the only time, but you know it isn’t. 🙂
Anyway, yep, we are so fucked, the lazy and thieves are rewarded, those trying to do right and live relatively free lives are being taxed, regulated, fined and incarcerated out of existence.
Most won’t/can’t do anything about it, just ask. Godly Government will fix it and provide. Trust in us.
Scary place we find ourselves. Unknown territory directly ahead.
“More young people would be buying more new gadgets and gizmos… starting new businesses… buying houses and trading up… and generally helping to keep the money spinning.”
Unfortunately the last 20 years have gutted the ability of small companies to actually compete. Globalization, over-regulation, and shady tax practices all serve to keep the small company down.
Most just want to sell out these days, start a small company, get the attention of a large one, and then sell at the drop of a hat.
Your husband refused to rake leaves when you were pregnant and you are still with him why? If you had any sense you would have left him with the bloated mortgage.
@Gadget, for what, welfare?
Or better yet, turn my daughter over to some state daycare and work 70 hours a week to make a living?
There are legitimate reasons and choices why I have stayed. Whether I have stayed, or not, that is a great analogy of people that self-limit their own behaviors with can’ts and won’ts.
Thanks though. Love me a Monday morning quarterback.
@TE: You’ve toughed it out and what you have to show for it is CHARACTER, something that’s very scarce these days.
@Westcoaster, I am certainly, and have always, been a character.
Don’t know that I actually have character, but what I do have is the deep unbridled love for my children and the blessing that my lazy drunken hub was gifted a business from his dad 30 years ago and that I was able to save it when it was on the brink of bankruptcy. A business that for now, and probably as long as I’m around, provides support for my daughter.
Young girls that see how EASY it is to walk away and depend on the State, or their mommies & daddies (which I never had as an option), and drop their infants into the care of strangers, without a qualm. Having lived through this before, and making a different choice, I know what they think of as an easy decision and a stupid woman, is anything but. You can’t know, what you don’t know, but you sure as hell can make others feel bad about their own decisions in their own lives. The internet has destroyed more souls than it has probably saved.
I was on welfare in the early 80s. Lasted less than 6 months and stopped the second my then hub got a job grossing over $100 a week. For a family of three and rents running around $350 a month. There was NO help back then for the working poor.
You child is a gift with a time limit. You will NEVER get back the years once gone. And liberal, statist, union-minded, non-thinking, propaganda spewing, occasionally harmful and deadly, “care” workers raising your children is, in my opinion, legally-mandated child abuse.
So I chose to stay and be the work mule, trust me, I’ve found ways to play both ways, instead of dumping the dad and dooming my daughter to the state’s raising.
I am really sad that others agree that is the better path than having to be the pack mule for a time. Ah well, such is our spoiled existences which have truly skewed our thought processes.
No wonder so many parents demand the State have so many laws and protections for their children’s sakes. So few have a frickin’ clue as to how to raise a smart, strong, hard-working, self-reliant, mentally strong, human. With their advice and decisions, it is pretty obvious their kids are in deep crap and doomed to a life of dependency and suffering.