All Things Economic

Something that we used to hear about and no longer do is the finite-ness of crude oil. A number of years ago I had heard that 2 pockets of crude oil were found in Alaska and estimates have calculated that it is enough oil to fuel the US for something like the next 400+ years.

The reason I mention it is that, if true, it sort of negates part of the reason to be putting ethanol in gas. That reason being that ethanol is a renewable resource. I'd hope that in WAY less than 100 years (nevermind 400) that we'd have long since developed viable non-fossil fueled energy sources. In theory, ethanol is also cheaper than gas, but that's only if/when gas prices are inflated for the reason du jour.

As those alternate fuels become more wide-spread, in theory, the price of gas should come down based on supply and demand. Of course, as the demand goes down they also ramp down the supply, so it tends to keep the price of gas more even.

Ethanol fuel gets lower gas mileage as well,, like pissing in the wind...libs are so fkn stupid..

"I was a bit surprised to see California come in below the national average at 23% despite being ranked eighth nationally in real estate activity expansion in 2021."

More to do with the size of the GDP than the real estate values. California's GDP is twice the size of New York's, and dwarves (dwarfs?) the other states mentioned.

And yet more thoughts "on the bubble."

An analysis on real estate as a percentage of a State's GDP looked at the contribution of three sectors to the State's total GDP: Construction, finance, and real estate. The nationwide average of these combined factors was 25%. The State most exposed to a real estate downturn (not even close really) is Wyoming where a staggering 82% of GDP in 2021 was tied to these three categories. Rounding out the top 5 are Delaware at 52%, Oklahoma at 41%, New York at 39% and Louisiana at 38%.

I was a bit surprised to see California come in below the national average at 23% despite being ranked eighth nationally in real estate activity expansion in 2021.

More thoughts on housing bubbles:

Trying to get myself out of the local insane housing market, I took a look at historical median home values for the country as a whole. Don't quit your day job dot com has a nice "mash up" of historical data (reportedly from the National Association of realtors, Robert Schiller, and the FHFA). The index starts at a median home value of 18,000 in early 1953 and carries forward to right around $358,000 in early 2022. A few observtions:

~The long-term housing inflation over this period is roughly 4.5%

~For the first roughly 20 years of the period, it was about 2.3%

~During the seven year "bubble" preceding the great recession (July 2000 to July 2.007) inflation in the median home value was roughly 8%

~ This is essentially the same rate of inflation in the median home price over the ten years (overall) since 2012

~However, for the period from January 2012 to January 2019 the rate was only 6%

~ The difference was made up over the last three years when that rate of inflation doubled to roughly 12%

Food for thought?

No doubt you were right so far

See Flip. I told you not to fret when you forecasted $5 gas in S.Carolina.

It’s Putin’s fault , it’s all Putin’s fault …….cmon man let’s burn gasohol so my car will miss and corn will now go up in price …..Listen here , we will need that corn at the end of the year to feed people.

Highest inflation since 1981

ww w.fox9.c om/news/us-inflation-report-consumer-prices-jumped-8-5-in-past-year-new-40-year-high?utm_campaign=trueanthem&utm_medium=trueanthem&utm_source=facebook&fbclid=IwAR3znTsg7Z8B9l-814_aW5AR0REQfA2zVqMwg6-1NPpD-y30Mt0rcxWnutw

I paid $5.64 for premium at the Indian reservation over the weekend.

That's about 30 cents less than out in the real world around here.

Last time I bought gas a couple of weeks ago I paid $6.12...

Interesting with food items how some have jumped, but it seems most of our staple items have remained fairly stable. Fuel costs can drive the cost of just about everything up due to transportation costs, and sometimes things go up with fuel prices but do not come back down when fuel prices come down. Shingles is one example of that.

The % of people's incomes going to pay for houses and vehicles has seen some of the biggest jumps that I see regarding inflation. Electric rates have jumped somewhat and may also be tied to fuel costs. Our last fuel oil delivery hit $5/gal. Diesel, at least in this area, tracks with fuel oil prices, making things that move by truck a bit more expensive.

All of these things take bites out of people's disposable income, but many will spend money they don't have regardless, so the economy seems to chug along regardless. I'm reading that the total household debt grew by $1 trillion last year,

So many people just resign themselves to "That is just what things cost now", which at least in some cases is allowing inflation to push higher, simply because so many people are willing to spend the money rather than push back and go without.

On Friday, I paid $4.79 and yesterday (I drove to Seattle for the weekend) it was $4.29 at the local family store, which doesn't price gouge. It's only come down $0.10 at the other places I drive by.

I don't think conditions are right for a recession, although it's been so long since there was a sensible policy on inflation that anyone with a short memory probably does believe the sky might be falling. The current state of horror at a 5% rate on 30 year mortgages is probably as good a gauge as anything about just how whacked that thinking is.

In addition to that, recessions are usually contractions based on fundamentals and longer term trends and the only one of those we have is a long delayed increase in worker salaries, which is a net good. Some of the other inflationary pressures (keeping in mind that zero inflation is a truly horrible idea, no matter what gets said to the contrary) are more short term and will, at worst, slow GDP growth. Which is a natural and truly necessary part of the economic cycle.

Paid 3.59 this morning. It's come down about 30 cents here in the last 2 weeks maybe.

Seeing gas prices come down a little. The cheap gas in our area was about $4/gal and last time I went by that station it was $3.73.

The Mrs paid $3.49/gal yesterday at BJs, but it was only some sort of 1 day gas sale.

I started working at Arby's in 1986.

Not in my employed yrs have I seen inflation like this.

Short term thinking.

It has been so long since we have seen this level of inflation people don't know how to handle it...

"A bunch of wall Street hype to try and convince the Fed to moderate monetary policy?"

More a kind of multi-directional anti-inflation mania. Sure, Wall Street is part of it, but it's also the natural outgrowth of too long spent tamping down inflation in lieu of more complex economic thinking.

Interesting that no one is taking the "pro recession" side of the argument. So what is all the talk about recession in the news? A bunch of wall Street hype to try and convince the Fed to moderate monetary policy?

@Hot

Depends I guess on what you consider a "correction". In the stock market that's taken to be a 10% decline or more. A 20% decline or more is considered a bear market. I expect the real estate market decline may be 20-30% or more. Maybe not a collapse, but definitely could put a lot of people underwater.

In the runup to the great recession, the driver was the voracious market for mortgage backed securities. The demand for product volume to fill these securitzed "baskets" was so great that lending standards basically went out the window. The problem included poor people who had no realistic chance to pay off the mortgages that predatory lenders got them in to, especially teaser rate loans. It also included middle class people who were similarly sold larger mortgages than they could afford. It also included "liar loans" or loans with no due diligence whatsoever, to people of all stripes who were speculating on price increases. The fundamental problem was that the demand for mortgage backed securities was based on the notion that very few people traditionally defaulted on mortgages. When the underwriting standards went out the window, so did that traditional paradigm of security. I don't see a repeat of that true collapse, but rather an interest rate driven market downturn that will result in a credit crunch.

The large player neighborhood buyer and Air BnB phenomena I see as two different things. the first is, I suspect, private equity driven and a quasi commercial real estate asset class. Traditionally single family rentals do not have the scale to carry their weight as investment properties. So I suspect this sector will pretty much collapse for two reasons. First, because it is at least partly driven by speculation in increasing prices which are probably going to hit a wall very soon. Second because, due to scale, rates of return on those type properties are already lower than comparable income properties (e.g. apartments). An increase in rate of return expectations with increasing interest rates will cause a drop in book value of the asset and create pressure to liquidate, creating actual marketplace drops in value. Air BnBs as far as I can tell, are pretty much ridiculous as investments for the same reason as residential rentals plus the added expense of cleaning and exorbitant property management fees. I see this market as supported by speculation on value increases as well. But I think any collapse in value of Air BnB type properties may be tempered by owners' subjective perceptions of the recreational/second home value of these properties. As far as I'm concerned there is no class of "investors" I would rather see have their asses handed to them. Air BnBs have basically destroyed my community where working people, particularly young working people can no longer afford homes due to speculation by wealthy outsiders in what are, from the standpoint of zoning and general business law, illegal enterprises in the first place.

It’s deeper than cars, houses, gas and groceries.

It’s time for me to get a new pair of Red Wings. What cost me $187 just over 2 years ago, is now $285. 50% price increase in 2 years is insane, no matter what you are buying.

Current,

I don’t see an imminent recession. I also don’t think we’ll see a housing bubble collapse. We will probably see a correction in housing prices, but not a complete collapse.

The only thing that makes me nervous is, as old Rumsfeld used to say, the unknown unknowns. There seems to be a ton of large buyers snapping up residential property with the intention to rent or AirBnB, but I don’t know how widespread that really is.

I saw a report that said the last great real estate collapse was not triggered by poorly qualified buyers defaulting on their mortgages, but was actually precipitated by rich and middle class speculators (flippers) walking away from their obligations in droves. Hopefully, something similar doesn’t happen again soon.

Some guy from Texas keeps predicting a recession over in the Politics forums.

More and more Wall Street pundits are calling for an imminent recession. I disagree. Housing bubble pop, yes, recession in the next, say, 12 months? I don't see it. Anyone care to argue the pro recession position (well, to "pro" but let's say "likely")?

That car was a #1 seller in France . Although Renault has never did good domestically .