[1rudeboy]

One way of looking at it (but just one way), is that producers are "eating" the increased price of raw commodities, and not passing it on to the next user. This would serve to keep inflation down.

However, when that producer "eats" the additional cost, that's a machine he didn't buy, or an employee he didn't hire. Essentially, this is what Higgs argues: policy-makers don't, or refuse, to see it.

[bd476]

1rudeboy wrote: One way of looking at it (but just one way), is that producers are "eating" the increased price of raw commodities, and not passing it on to the next user. This would serve to keep inflation down. However, when that producer "eats" the additional cost, that's a machine he didn't buy, or an employee he didn't hire. Essentially, this is what Higgs argues: policy-makers don't, or refuse, to see it.

Thanks for the explanation, 1rudeboy. The producers/businessmen must be reimbursed, or paid, whether the payment is gained by drastic budget revamping, such as in not buying a new machine, not hiring new employees. But that also negatively impacts the economy.

How can policy makers not recognize this?

We're in deep. Hope you don't mind my pinging a few people.

[1010RD]

Thanks for the ping. More important and more overlooked is the psychology QE and other forms of government intervention and the effect it has on businesses. Every savvy RE investor I know sees a paradox in the RE market - low prices being preserved by ZIRP.

We know that once rates rise price pressures will mount because buyers don’t buy the price, they buy the payment. In the ZIRP environment you cannot make good longterm RE decisions. Right now you can buy relatively low priced RE at low interest rates and good rents if you can finance it.

Commercial mortgage rates are 5 year terms for the most part. 5 years from now you could have a refinance disaster on your hands if interest rates rise while incomes continue to stagnate. It makes long term planning difficult.

So all the QE is just amphetimine pumped into a tired body. You’re not getting the normal or natural creative destruction you should see in the market and then the new growth based on Supply/Demand reality. You’re getting sustainment by government debt and a prostituted FED. RE would be in recovery had it been allowed to seek it’s own level and the more I read about it the less I believe the “entire financial system was in meltdown”. Bush fell for it because the regulators/FED/Bankers were all one and the same.

There’s a recent article out of the Dallas Fed about the importance of small banks to economic growth. They killed the S&L market and they’ve nearly ended the small commuity banks and even regionals are under incredible pressure.

Like most liberal policies they reinforce the worst outcomes and a vicious cycle. The big guys investing in SFR is proof of this. They’re all ex-officios of the RTC and they’re getting 0% loans from the FHA with 50% down to buy the FHA’s REOs. Why not just offer those loans directly to investors and stop the mess? It’s stupid and it’s a hallmark of crony capitalism.

I know an investor who begged the bank to extend his loan or give him a principal reduction or interest rate reduction. They didn’t care and because of them he couldn’t refinance because his LTV wasn’t there. They FC’d on him and he lost 6 properties. They’re vacant and sold for 30% fo the UPB. They could have cut him a deal at 50% of the UPB and everyone would have been better off. It’s a messy situation made worse by our friends the Government.

[1010RD]

Thanks for the ping. More important and more overlooked is the psychology QE and other forms of government intervention and the effect it has on businesses. Every savvy RE investor I know sees a paradox in the RE market - low prices being preserved by ZIRP.

We know that once rates rise price pressures will mount because buyers don’t buy the price, they buy the payment. In the ZIRP environment you cannot make good longterm RE decisions. Right now you can buy relatively low priced RE at low interest rates and good rents if you can finance it.

Commercial mortgage rates are 5 year terms for the most part. 5 years from now you could have a refinance disaster on your hands if interest rates rise while incomes continue to stagnate. It makes long term planning difficult.

So all the QE is just amphetimine pumped into a tired body. You’re not getting the normal or natural creative destruction you should see in the market and then the new growth based on Supply/Demand reality. You’re getting sustainment by government debt and a prostituted FED. RE would be in recovery had it been allowed to seek it’s own level and the more I read about it the less I believe the “entire financial system was in meltdown”. Bush fell for it because the regulators/FED/Bankers were all one and the same.

There’s a recent article out of the Dallas Fed about the importance of small banks to economic growth. They killed the S&L market and they’ve nearly ended the small commuity banks and even regionals are under incredible pressure.

Like most liberal policies they reinforce the worst outcomes and a vicious cycle. The big guys investing in SFR is proof of this. They’re all ex-officios of the RTC and they’re getting 0% loans from the FHA with 50% down to buy the FHA’s REOs. Why not just offer those loans directly to investors and stop the mess? It’s stupid and it’s a hallmark of crony capitalism.

I know an investor who begged the bank to extend his loan or give him a principal reduction or interest rate reduction. They didn’t care and because of them he couldn’t refinance because his LTV wasn’t there. They FC’d on him and he lost 6 properties. They’re vacant and sold for 30% fo the UPB. They could have cut him a deal at 50% of the UPB and everyone would have been better off. It’s a messy situation made worse by our friends the Government.