10 ms·

Mortgage debt will probably not be a problem in this cycle. People have this bias to remember most recent event, but it's rarely the same thing twice in a row:

Mortgage debt will probably not be a problem in this cycle. People have this bias to remember most recent event, but it's rarely the same thing twice in a row: https://imgur.com/a/0dT7iHK https://imgur.com/a/0dT7iHK Corporate debt may be: https://imgur.com/a/b54hMSg https://imgur.com/a/b54hMSg And frankly with the amount of outstanding US govt debt and underfunded pension & healthcare liabilities the USD may either get dethroned and devalued or sent into the negative interest rates purgatory like Japan is currently living in. Japan cannot possibly ever raise rates, at 2% rates 100% of their tax take will go towards paying the interest on their 250% national debt. Add to that the history of Smoot-Hawley and the general outlook of the 1930s ...

AWildC182 7y ago
There definitely seems to be motive and opportunity on the housing side though right? Student debt among other things is high and not many 25-35yo people are buying houses but there's a lot of cash chasing returns. These mortgage backed securities are always seen as a reliable way to make a buck but nobody is questioning the market because "It'll never happen the same way twice".
- H8crilA 7y ago
  I meant it's probably not going to be the same "core reason". When shit hits the fan probably all delinquencies and spreads will go up, including mortgage.
randogogogo 7y ago
Queue the ZeroHedge style conspiracy theories and watch the sparks fly. That idea of a dethroned dollar is interesting, any thoughts at was is likely to take over? The Euro?
- beamatronic 7y ago
  Coming from ZH? it must be gold.
mc32 7y ago
So if the USD becomes weak, who out there could be in a position to become stronger? I don’t see any candidate. Euro growth is weak. CN bookkeeping’s suspect...
- toomuchtodo 7y ago
  India, still a youngish population compared to China but with 1.4 billion people and still rapidly developing. Also helps they're strong in service industries, deliverable to the world.
  - moreorless 7y ago
    Doing the needful?
    - deleted 7y ago
      [deleted]
    - beamatronic 7y ago
      I haven’t heard that one in about 10 years.
  - sremani 7y ago
    I grew up in India and have family in India. India is not ready for PRIME TIME not in my life time. It's complicated, its nation of nations. Still caste is a still is strong basis of political patronage. It has come a long way, but has long way to go! India's Navy is a joke, Airforce is a flying junkyard and Army is an amalgam of bad ideas, and pension commitments. I do not see India going anywhere. India has been hope of Asia since 1950s, and it will remain that way into 2050!
  - deleted 7y ago
    [deleted]
- breerly 7y ago
  Bitcoin.
anonuser123456 7y ago
One of these days the gold bugs will be right. This might be the one...
- TremendousJudge 7y ago
  How exactly?
  - H8crilA 7y ago
    Well a currency devaluation looks like decreasing numbers on USD/gold and also like increasing numbers on gold/USD.
- dageshi 7y ago
  I was one once, they may sort of be right. Gold will never become a "standard" again, but it could be extremely useful for preserving wealth from one standard to another. Gold has always been touted as a hedge against inflation, it's not, it's a hedge against financial system instability, inflation being a major symptom of such instability.
  - tryptophan 7y ago
    I've read that gold is a hedge against unexpected inflation, but this dumbed down to 'gold is a hedge for inflation'.
  - roenxi 7y ago
    Since around 1970 (US leaves the gold standard) gold has slightly outpaced inflation according to the US BLS inflation calculator [0]. Calculator thinks $6,000/kg => $41,000/kg, actual price $6,000/kg to $48,000/kg. That makes sense because 'true' inflation (consumer goods + assets) probably outpaces official inflation (consumer goods only). Gold can't exactly get more or less valuable over time. It is a rock. We have no practical uses for it. [0] https://www.bls.gov/data/inflation_calculator.htm https://www.bls.gov/data/inflation_calculator.htm
    - 7y ago
skybrian 7y ago
Is there a reason why Japan shouldn't monetize the debt? The usual explanation is that it would cause inflation, but I'm not sure how that works for government debt that trades near 0% anyway. It's a tradeable store of value that you can trade 1:1 for money, so might as well be money?
- H8crilA 7y ago
  Bernanke was pitching them this idea. He suggested the Japanses government issues zero-coupon perpetual bonds and the BoJ buys them. Ha, ha, "bonds". As crazy as this sounds I think it makes sense - just admit honestly that the situation is fucked up, monetize, generate stagflation and eventual normalization.
  - skybrian 7y ago
    It seems like I'm missing something basic. I would like to understand when the inflation happens and where it comes from. More money chasing fewer goods, sure, but if we already have too much of a money-equivalent, why aren't bondholders chasing goods with it already? And, clearly there isn't any inflation. It seems like demand should have increased when the government sold the bonds and spent the money.
    - nostrademons 7y ago
      You and everybody else. Japan's current situation seems to stump most economic models. I wonder if there's something about culture and having basic survival needs met. Most economic models assume effectively unlimited long-term demand: as productivity grows and people in existing sectors are thrown out of work, they will find new things to do, and the people who have reaped the financial rewards of productivity growth will find things that they want to spend money on, creating new jobs for the previously unemployed. What if this doesn't happen? What if instead of using money as a means to an end, people use it as the end itself, effectively treating it as a scorecard to be maximized without spending it? And what if on the other end, instead of people finding new ways to obtain money, they opt out of the economy instead, creating alternate games (literally - video games are apparently the main extra-economic outlet) to play. With basic survival needs taken care of by parents, there's no forcing function that makes them participate in the economy. You'd get a reality that looks fairly similar to our actual reality, in Japan and increasingly in other developed areas of the globe.
diminoten 7y ago
Going through mortgage application now, they grill the shit out of you on every little detail of your life now. They're aware of the last crash, and have done a lot to compensate.
- YourMatt 7y ago
  On the other hand, I recently sold a house that received a lot of offers. Only one person actually had the down payment money. Everyone else's loans were approved, but most were people were coming with low cash and lower income than I would have expected. Some looked like irresponsible loans to me.
  - subsaharancoder 7y ago
    Mind if I ask which state? I'm asking because I live in CA and all I keep hearing is people being outbid and some times with cash offers.
    - YourMatt 7y ago
      This was in Colorado. The market's hot, and I think that's in part because people are afraid that Colorado is going full California on real estate. They want to get a piece while they still can.
  - diminoten 7y ago
    Why would you be involved in their loans at all, if you're the seller of the house? How would you know what they were putting as down payments or what their incomes were?
    - YourMatt 7y ago
      I was given the information to help base my decision on which offer to accept. The idea is that the better qualified buyer has a better chance of actually closing. I thought it was a little strange as well. Each of my offers came with details about their financing, and in a few cases, the buyer's income information.
notadoc 7y ago
> Mortgage debt will probably not be a problem in this cycle. Disagree if you consider that many people are getting mortgages on overvalued properties at or near market peaks now, and in another significant downturn those could easily be underwater by 15%-50%. The same thing happened widely in the prior real estate bust in many trendy areas, leading to many foreclosures.
- fortran77 7y ago
  The biggest damage was in non-trendy areas like Las Vegas suburbs or Orlando suburbs.
- losteric 7y ago
  I only see this happening in exploding tech markets like SF, where the impact would honestly be minimal - some people might have to downsize but we wouldn't see mass unemployment or homelessness/crippling debt like after 2008.
jstewartmobile 7y ago
I'd put my bets on student loan debt. The push for forgiveness is so strong, there must be some other force at play--something more than just pandering to millenials.
- s3r3nity 7y ago
  Looking at the data, the best estimates peg student loans to be consolidated to ~10-12% of the US 18+ population. Not saying it _isn't_ part of the story, but I don't think it's as big of a factor as folks might initially (or anecdotally) believe.
  - jstewartmobile 7y ago
    that's also what they said about residential mortgage debt in 2007. never underestimate the bankers' ability to use one large batch of shitty loans to back an even bigger batch of them.
- to11mtm 7y ago
  It's more than just pandering to millenials. This is also about pandering to Academia. Depending on how the student loan bubble bursts, it could wind up with a number of institutions being forced to shut their doors, or make large cuts to staff/programs/etc.
  - jstewartmobile 7y ago
    Definitely a factor. Not just a coincidence that Warren was a professor, Sanders' wife was a college administrator, Buttigieg's dad is a professor...
    - sjg007 7y ago
      Student loans are basically a variable tax to attend college. There should be a relief valve of pay like 10% extra in taxes until the principal is paid off. People paying interest on the loans can get a tax deduction for the interest as well (it actually makes no sense to have interest on the loans because that interest is going back to the Feds in 90% of cases).
simonebrunozzi 7y ago
> at 2% rates 100% of their tax take will go towards paying the interest on their 250% national debt. I'm not sure I agree with your math. Care to elaborate a bit further?
- aidenn0 7y ago
  I know nothing about japan so I worked the numbers 1. Japan's debt is 250% GDP (from GP) 2. At 2% interest rates, 100% of the tax haul will go towards servicing debt (from GP) 3. 2.5*0.02 = 0.05; Japans tax take is 5% of GDP? #3 seems off by a factor of 6. So No clue what GP was suggesting.
ta0xdeadbeef 7y ago
Consumer debt (auto loans/credit cards) spooks me more than corporate debt, since that's the tentpole that's kept up spending with stagnant wages. Auto loans are especially sketchy, it's way too easy to buy a car you can't afford.

AWildC182 7y ago

There definitely seems to be motive and opportunity on the housing side though right? Student debt among other things is high and not many 25-35yo people are buying houses but there's a lot of cash chasing returns. These mortgage backed securities are always seen as a reliable way to make a buck but nobody is questioning the market because "It'll never happen the same way twice".

H8crilA 7y ago
I meant it's probably not going to be the same "core reason". When shit hits the fan probably all delinquencies and spreads will go up, including mortgage.

randogogogo 7y ago

Queue the ZeroHedge style conspiracy theories and watch the sparks fly. That idea of a dethroned dollar is interesting, any thoughts at was is likely to take over? The Euro?

beamatronic 7y ago
Coming from ZH? it must be gold.

mc32 7y ago

So if the USD becomes weak, who out there could be in a position to become stronger? I don’t see any candidate. Euro growth is weak. CN bookkeeping’s suspect...

toomuchtodo 7y ago
India, still a youngish population compared to China but with 1.4 billion people and still rapidly developing. Also helps they're strong in service industries, deliverable to the world.
- moreorless 7y ago
  Doing the needful?
  - deleted 7y ago
    [deleted]
  - beamatronic 7y ago
    I haven’t heard that one in about 10 years.
- sremani 7y ago
  I grew up in India and have family in India. India is not ready for PRIME TIME not in my life time. It's complicated, its nation of nations. Still caste is a still is strong basis of political patronage. It has come a long way, but has long way to go! India's Navy is a joke, Airforce is a flying junkyard and Army is an amalgam of bad ideas, and pension commitments. I do not see India going anywhere. India has been hope of Asia since 1950s, and it will remain that way into 2050!
- deleted 7y ago
  [deleted]
breerly 7y ago
Bitcoin.

anonuser123456 7y ago

One of these days the gold bugs will be right. This might be the one...

TremendousJudge 7y ago
How exactly?
- H8crilA 7y ago
  Well a currency devaluation looks like decreasing numbers on USD/gold and also like increasing numbers on gold/USD.
dageshi 7y ago
I was one once, they may sort of be right. Gold will never become a "standard" again, but it could be extremely useful for preserving wealth from one standard to another. Gold has always been touted as a hedge against inflation, it's not, it's a hedge against financial system instability, inflation being a major symptom of such instability.
- tryptophan 7y ago
  I've read that gold is a hedge against unexpected inflation, but this dumbed down to 'gold is a hedge for inflation'.
- roenxi 7y ago
  Since around 1970 (US leaves the gold standard) gold has slightly outpaced inflation according to the US BLS inflation calculator [0]. Calculator thinks $6,000/kg => $41,000/kg, actual price $6,000/kg to $48,000/kg. That makes sense because 'true' inflation (consumer goods + assets) probably outpaces official inflation (consumer goods only). Gold can't exactly get more or less valuable over time. It is a rock. We have no practical uses for it. [0] https://www.bls.gov/data/inflation_calculator.htm https://www.bls.gov/data/inflation_calculator.htm
  - 7y ago

skybrian 7y ago

Is there a reason why Japan shouldn't monetize the debt? The usual explanation is that it would cause inflation, but I'm not sure how that works for government debt that trades near 0% anyway. It's a tradeable store of value that you can trade 1:1 for money, so might as well be money?

H8crilA 7y ago
Bernanke was pitching them this idea. He suggested the Japanses government issues zero-coupon perpetual bonds and the BoJ buys them. Ha, ha, "bonds". As crazy as this sounds I think it makes sense - just admit honestly that the situation is fucked up, monetize, generate stagflation and eventual normalization.
- skybrian 7y ago
  It seems like I'm missing something basic. I would like to understand when the inflation happens and where it comes from. More money chasing fewer goods, sure, but if we already have too much of a money-equivalent, why aren't bondholders chasing goods with it already? And, clearly there isn't any inflation. It seems like demand should have increased when the government sold the bonds and spent the money.
  - nostrademons 7y ago
    You and everybody else. Japan's current situation seems to stump most economic models. I wonder if there's something about culture and having basic survival needs met. Most economic models assume effectively unlimited long-term demand: as productivity grows and people in existing sectors are thrown out of work, they will find new things to do, and the people who have reaped the financial rewards of productivity growth will find things that they want to spend money on, creating new jobs for the previously unemployed. What if this doesn't happen? What if instead of using money as a means to an end, people use it as the end itself, effectively treating it as a scorecard to be maximized without spending it? And what if on the other end, instead of people finding new ways to obtain money, they opt out of the economy instead, creating alternate games (literally - video games are apparently the main extra-economic outlet) to play. With basic survival needs taken care of by parents, there's no forcing function that makes them participate in the economy. You'd get a reality that looks fairly similar to our actual reality, in Japan and increasingly in other developed areas of the globe.

diminoten 7y ago

Going through mortgage application now, they grill the shit out of you on every little detail of your life now. They're aware of the last crash, and have done a lot to compensate.

YourMatt 7y ago
On the other hand, I recently sold a house that received a lot of offers. Only one person actually had the down payment money. Everyone else's loans were approved, but most were people were coming with low cash and lower income than I would have expected. Some looked like irresponsible loans to me.
- subsaharancoder 7y ago
  Mind if I ask which state? I'm asking because I live in CA and all I keep hearing is people being outbid and some times with cash offers.
  - YourMatt 7y ago
    This was in Colorado. The market's hot, and I think that's in part because people are afraid that Colorado is going full California on real estate. They want to get a piece while they still can.
- diminoten 7y ago
  Why would you be involved in their loans at all, if you're the seller of the house? How would you know what they were putting as down payments or what their incomes were?
  - YourMatt 7y ago
    I was given the information to help base my decision on which offer to accept. The idea is that the better qualified buyer has a better chance of actually closing. I thought it was a little strange as well. Each of my offers came with details about their financing, and in a few cases, the buyer's income information.

notadoc 7y ago

> Mortgage debt will probably not be a problem in this cycle. Disagree if you consider that many people are getting mortgages on overvalued properties at or near market peaks now, and in another significant downturn those could easily be underwater by 15%-50%. The same thing happened widely in the prior real estate bust in many trendy areas, leading to many foreclosures.

fortran77 7y ago
The biggest damage was in non-trendy areas like Las Vegas suburbs or Orlando suburbs.
losteric 7y ago
I only see this happening in exploding tech markets like SF, where the impact would honestly be minimal - some people might have to downsize but we wouldn't see mass unemployment or homelessness/crippling debt like after 2008.

jstewartmobile 7y ago

I'd put my bets on student loan debt. The push for forgiveness is so strong, there must be some other force at play--something more than just pandering to millenials.

s3r3nity 7y ago
Looking at the data, the best estimates peg student loans to be consolidated to ~10-12% of the US 18+ population. Not saying it _isn't_ part of the story, but I don't think it's as big of a factor as folks might initially (or anecdotally) believe.
- jstewartmobile 7y ago
  that's also what they said about residential mortgage debt in 2007. never underestimate the bankers' ability to use one large batch of shitty loans to back an even bigger batch of them.
to11mtm 7y ago
It's more than just pandering to millenials. This is also about pandering to Academia. Depending on how the student loan bubble bursts, it could wind up with a number of institutions being forced to shut their doors, or make large cuts to staff/programs/etc.
- jstewartmobile 7y ago
  Definitely a factor. Not just a coincidence that Warren was a professor, Sanders' wife was a college administrator, Buttigieg's dad is a professor...
  - sjg007 7y ago
    Student loans are basically a variable tax to attend college. There should be a relief valve of pay like 10% extra in taxes until the principal is paid off. People paying interest on the loans can get a tax deduction for the interest as well (it actually makes no sense to have interest on the loans because that interest is going back to the Feds in 90% of cases).

simonebrunozzi 7y ago

> at 2% rates 100% of their tax take will go towards paying the interest on their 250% national debt. I'm not sure I agree with your math. Care to elaborate a bit further?

aidenn0 7y ago
I know nothing about japan so I worked the numbers 1. Japan's debt is 250% GDP (from GP) 2. At 2% interest rates, 100% of the tax haul will go towards servicing debt (from GP) 3. 2.5*0.02 = 0.05; Japans tax take is 5% of GDP? #3 seems off by a factor of 6. So No clue what GP was suggesting.

ta0xdeadbeef 7y ago

Consumer debt (auto loans/credit cards) spooks me more than corporate debt, since that's the tentpole that's kept up spending with stagnant wages. Auto loans are especially sketchy, it's way too easy to buy a car you can't afford.