Tuesday, February 10, 2009

CNN Video: Lessons from the Great Depression

I can't embed videos from CNN/Money, but here is a video discussing lessons from the Great Depression.

A key quote from the video:
The one lesson we learned was never allow the banking system to collapse.
Milton Friedman made roughly the same argument here.
Posted by at 8:45 AM
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31 comments:

  1. AnonymousFebruary 10, 2009 9:41 AM

    that was before the internet.

    crony capitalism, dysfunctional capital markets, and Wall Street are obsolete. when will America wake up and realize it?

    maybe marshall law will accomplish what reason will not.

    ReplyDelete
  2. AnonymousFebruary 10, 2009 11:20 AM

    The scary thing is that the 7 and 10 year ARMs have not come due yet!! =oO

    ReplyDelete
  3. AnonymousFebruary 10, 2009 12:26 PM

    Orlando said...
    The scary thing is that the 7 and 10 year ARMs have not come due yet!! =oO

    Yep - my 7/1 doesnt reset for another few weeks still, when it goes from 6.25% to 4.875%.

    I am absolutely terrified by what I will do with that extra $500 in my pocket each month!!!

    ReplyDelete
  4. AnonymousFebruary 10, 2009 12:39 PM

    500 K a year not enough...

    http://washingtondc.craigslist.org/doc/rnr/1028929073.html

    ReplyDelete
  5. AnonymousFebruary 10, 2009 2:15 PM

    So I just looked at the new MRIS data.

    Who here is shocked to see all the "immune" zone are down again?

    DC -16%
    Alexandria City -20%
    Arlington -3%

    Another month of data, another month of excuses.

    ReplyDelete
  6. AnonymousFebruary 10, 2009 2:19 PM

    MRIS Jan 2009 Stats for Washington, DC:

    Total Sold Dollar Volume:
    $ 125,331,032 (2009)
    $ 176,970,419 (2008)
    - 29.18 % (% change)
    Average Sold Price:
    $ 495,380
    $ 556,511
    - 10.98 %
    Median Sold Price:
    $ 360,000
    $ 428,000
    - 15.89 %
    Total Units Sold:
    253
    318
    - 20.44 %
    Average Days on Market:
    112
    87
    28.74 %
    Average List Price for Solds:
    $ 553,500
    $ 600,053
    - 7.76 %
    Avg Sale Price as a percentage of Avg List Price:
    89.50 %
    92.74 %

    http://www.mris.com/reports/stats/monthly_reti.cfm

    ReplyDelete
  7. AnonymousFebruary 10, 2009 2:24 PM

    (I'm Anon 11:19) Anon 11:15: I'm not surprised but Arlington continues to baffle me.

    ReplyDelete
  8. AnonymousFebruary 10, 2009 2:28 PM

    I'm not surprised. Who buys houses in January? ... especially with the inauguration shutting down Washington and everywhere close in ... ?

    Bubbleheads will grasp at any sign of falling prices, won't they?

    ReplyDelete
  9. AnonymousFebruary 10, 2009 2:30 PM

    Anon 11:28, these #'s compare Jan 2009 to Jan 2008. As you can see, January 2008 was much healthier, so people do buy houses in January, just not this year.

    ReplyDelete
  10. AnonymousFebruary 10, 2009 3:05 PM

    20009 numbers...(lance's zip)

    Median: $407k -13.77%

    Back in May 2005 when lance bought the median in his zip was $470k!

    ReplyDelete
  11. AnonymousFebruary 10, 2009 6:08 PM

    I sitll cant believe arlington. THe world has come apart at the seams, the entire US (bubble markets & non-bubble markets) is down 15% YOY, and all Arlington can scrounge up is a very measly little -3% ?!?!?!?!?!

    All things considered, Arlington may very well be the strongest market in the entire USA right now.

    ReplyDelete
  12. AnonymousFebruary 11, 2009 1:41 AM

    Arlington is down over 20% from the peak.

    It is doing better than most of the area, but that is a big hit.

    ReplyDelete
  13. AnonymousFebruary 11, 2009 6:59 AM

    The main lesson from the Great Depression: Don't buy, rent. Save the difference in diversified securities and money market accounts. Taking your lunch to work, car pooling, canceling cable TV, and other money-saving steps were crucial too.

    People who followed these simple steps reigned supreme during the Great Depression.

    ReplyDelete
  14. LanceFebruary 11, 2009 9:20 AM

    Yep, the canceled their cable TV during the depression ;)

    Actually, what you are recommending is a prescription for both personal and societal disaster. Granted, you don't want to spend indiscriminatorily, but as even both parties are agreeing, you do need to spend. If you don't you just help perpetuate a cycle of disincentive for anyone to work ... And the bottom line is that when no one is working, there is nothing for others to consume or be able to consume.

    And those who came out of the Depression the healithest financially? ... Those who bought, bought, bought! Think Rockefellers, think Kennedys, think those who didn't wallow in self pity and shut down economic activity. The others were just fortunate that Roosevelt instituted Social Security and then that the war came about to give them jobs. Their "save save save" mantra would have otherwise saved them right into the poor house.

    ReplyDelete
  15. AnonymousFebruary 11, 2009 1:34 PM

    More great advice from lance!!



    "That's right that's right ... That tiny speck of the market that was only buying the cheapest of places to begin with is going to be soooo missed ... You bubbleheads will grasp at any straw, won't you. Your theory is over. It was debunked the minute the big investment firms revealed how very little the default of a few subprimes was going to affect them. The entire BH theory was predicated on the assumption that defaulting mortgages would cause a surge in supply and a corresponding plunge in prices. Well, the catalyst for that surge has been debunked and your theory exposes as fraudulent. Admit you were wrong. It's over. It's just a regular business cycle. And we've indisputably aready bottomed out. Where does that leave you with your far fetched theory?" -lance 22 March 2007


    Lance, if you had taken Econ101, one thing you would have learned is that it is perfectly possible for smart decisions made on an individual level to be harmful to the economy as a whole.

    Saving money is a good idea as an individual, especially when the economy is bad, but excess saving by the population in general can hurt the economy. (This of course is the classic example everyone knows.)

    The corollary to this is that excessive spending on the part of the general population is also harmful to the general economy. This is what we are now transitioning from and why we are in such a mess.

    During the bubble years people simply overspent and made up the difference with debt. Housing is the most obvious example, but it isn't the only one.

    This recession was inevitable because our level of spending was unsustainable. Eventually savings had to increase, which is what is now happening.

    Going back to our original topic, it is absolutely good advice to save money right now. There is a great deal of uncertainty in the job market and it would be wise to have a cushion available. Since the individuals of this country can't count on the same sort of bailout the banks can, we had better watch out for ourselves.

    For planning to buy a home, saving is also the most sensible course of action. Even as your saving grow housing prices will continue to fall for the foreseeable future.

    Oh yeah, and I am not even going to waste time trying to make sense of your typically idiotic assessment of the Great Depression.

    ReplyDelete
  16. AnonymousFebruary 11, 2009 3:04 PM

    Arlington now has the slowest rate of decline of anywhere in the metro area...WTF!!!!!

    ReplyDelete
  17. AnonymousFebruary 11, 2009 10:02 PM

    "Arlington now has the slowest rate of decline of anywhere in the metro area...WTF!!!!!"

    I agree anon - this is such crap...I want to go back in time - back to 2005 when this blog was filled with doomers...just wait Arlington will be down (insert some absurd price here). Arlington is NOT IMMUNE.

    Excuse my french, but F YOU all. Here we are in 2009 and we have the smallest declines in the entire metro area.

    What say you 2005 doomers. You promised me frog marches - WHERE ARE MY GOD DAMN FROG MARCHES???

    ReplyDelete
  18. AnonymousFebruary 11, 2009 10:46 PM

    Arlington sucks the least... what a great mantra.

    ReplyDelete
  19. AnonymousFebruary 11, 2009 10:50 PM

    The top 10 bubble free zones included Arigton..... and a suburb of Detroit. I often compare Arligton with Detroit as two places I do not live in.

    ReplyDelete
  20. AnonymousFebruary 11, 2009 11:25 PM

    What say you 2005 doomers. You promised me frog marches - WHERE ARE MY GOD DAMN FROG MARCHES???

    I told you - just wait its coming soon.

    I know I know - I told you this in 2005, and 2006, and 2007 and 2008.

    This time, I swear its coming - scouts honor!!!

    P.s. See you in 2010 when it doesnt happen AGAIN!!!

    ReplyDelete
  21. AnonymousFebruary 12, 2009 1:43 AM

    "I agree anon - this is such crap...I want to go back in time - back to 2005 when this blog was filled with doomers...just wait Arlington will be down (insert some absurd price here). Arlington is NOT IMMUNE.

    Excuse my french, but F YOU all. Here we are in 2009 and we have the smallest declines in the entire metro area."


    Yeah, merely down 20%... Arlington is indeed immune! lol

    2005-499k
    2006-522k
    2007-435k
    2008-422k
    2009-411k

    The way you idiot housing pumpers describe things you would think Arlington wasn't down 20%+ from the peak and still falling.

    Yeah, it is falling slower, but it is still way down.


    I bet the median home-buyer in Arlington from 2006 is just happy as a clam to know that they have "only" lost $111k.

    ReplyDelete
  22. AnonymousFebruary 12, 2009 7:33 AM

    Hi Lance!

    Alexandria reports in.


    # The average assessed value for a residential single-family home as of January 1, 2009, is $637,154. This is a decrease of $22,836, or 3.46% from the previous year.

    # The average assessed value for an existing residential condominium as of January 1, 2009, is $301,718. This is a decrease of $24,711, or 7.57%, from 2008.



    Boo-hoo. After my place doubled in value, I've lost 3.46%.

    ReplyDelete
  23. AnonymousFebruary 12, 2009 11:25 AM

    2005-499k
    2006-522k
    2007-435k
    2008-422k
    2009-411k

    Is that numbers for the whole year, or just for the month of January (i.e. subject to wild swings)?

    Personally, I like to use a much broader number like annual medians which encompass all highs and lows - but thats just me I guess.

    ReplyDelete
  24. AnonymousFebruary 12, 2009 12:42 PM

    In a rapidly changing market annual numbers will also be very slow to reflect the true condition of the market.

    Three straight years down from peak is not a statistical blip. If prices had dropped sharply one year and then rebounded again the next year you might have a point, but in this case prices dropped sharply, and just kept dropping.

    ReplyDelete
  25. AnonymousFebruary 12, 2009 1:11 PM

    "If prices had dropped sharply one year and then rebounded again the next year you might have a point."

    You mean like say August median prices in Arlington for the last 3 years:

    Aug 06 -14.29%
    Aug 07 +25.71%
    Aug 08 -14.06%

    Or Maybe DC for the last 4 Januaries:

    Jan 06 +6.64%
    Jan 07 -3.73%
    Jan 08 +11.17
    Jan 09 -15.89

    Thats why I like a more stable picture taking in medians for the whole year - like this:

    Arl
    2005 499K
    2006 482K
    2007 475K
    2008 445K (my guess, numbers published in the next month)

    So, while there are indeed declines, they are more like -10.8% for the last 4 years - about 1/2 the drop you claim.

    So far this year, we have a further negative trending (Jan 09) of -2.7%. My guess is this is a bit small, and there will be much larger monthly declines, and maybe even a positive increase or two. However, lest I jump around alot and say Arlington is DOWN 15% one month or ARLINGTON is UP 3% the next, I prefer to take a bit of a longer view.

    But again, maybe its just me.

    ReplyDelete
  26. OliveFebruary 12, 2009 1:24 PM

    I see the argument for taking the longer view as well but I also agree with Anon 12:42's point that the market is changing quickly and sales that occurred in the first 1/2 of 2008 are not that relevant to today. I think doing something like a 3 month moving average might be a good compromise.

    ReplyDelete
  27. AnonymousFebruary 12, 2009 1:46 PM

    A moving average would be an improvement for sure, not perfect, but an improvement.

    In most markets comps from months ago are still perfectly valid, but the markets are all screwed up right now and things are moving quickly.

    It is too bad we can't get something like Case Shiller broken down by zip code. You would think their data would allow something like that, but that assumes their calculations are pretty automated and their dataset allows for sufficient granularity.

    ReplyDelete
  28. AnonymousFebruary 12, 2009 3:46 PM

    "It is too bad we can't get something like Case Shiller broken down by zip code."

    Actually, they did. Not for DC specifically, but for alot of other metro areas:

    http://www2.standardandpoors.com/spf/pdf/index/052708_Housing_bubbles_collapse.pdf

    Many bloggers dismissed it because the paper's conclusion - close in places like Arlington will fall the least and be the first to recover - was incompatible with their worldview (e.g. no place is different).

    Now that the blogger venom has died down significantly, its worth reposting it.

    I keep waiting and hoping they update this and give us more current zip code data - especially for DC. Keep your eyes peeled.

    ReplyDelete
  29. AnonymousFebruary 12, 2009 3:48 PM

    Sorry it looks like that link got cut off. Go to google and type "housing bubbles collapse inward" and it should be the first result.

    ReplyDelete
  30. AnonymousFebruary 13, 2009 2:44 AM

    "Many bloggers dismissed it because the paper's conclusion - close in places like Arlington will fall the least and be the first to recover - was incompatible with their worldview (e.g. no place is different)."

    You should really drop the strawmen as they don't help you in the slightest.

    Places like Arlington saw the smallest run-up during the bubble. For that reason if no other its downside potential is limited.

    Just because a place will fall less doesn't mean it won't fall a large amount.

    Nobody here is trying to say "everywhere is the same."

    What people are saying is that Arlington is not "immune." It experienced the bubble just like the rest of the region and since the bust has begun it has fallen a big chunk and continues to fall.

    In the end it will probably fall less, but that doesn't mean it is anywhere near done right now.

    ReplyDelete
  31. AnonymousFebruary 13, 2009 10:01 AM

    "Places like Arlington saw the smallest run-up during the bubble. For that reason if no other its downside potential is limited."

    Uhh No. Runup by area 2000-peak:

    Alexandria +134%
    Arlington +129%
    Fairfax +129%
    Loudoun +132%
    PWC +182%

    PWC's crash isnt surprising given how much further it rose than the rest. Thats not the case with the rest of them. All 4 rose pretty much at the same rate. The run down however, is obviously another story...

    ReplyDelete

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