Very interesting post over at five thirty eight.....he asks the question "is there a pessimism bubble?"
Housing bubble bloggers are often accused of being overly pessimistic, so I thought this was apropos. While I am certainly bearish on the economy, and have been for over a year and a half, my hope is that we are now entering the containment phase (having more or less assessed majority of the damage.......prior to this December I don't think everyone fully realized just how bad things are).
Subscribe to:
Post Comments (Atom)
Posts
13 comments:
I believe that the change in your perspective, which I predicted, is already starting.
Undoubtedly (I should have mentioned that earlier =)
Although, I am more bearish on the economy than even Roubini who thinks the recession is half way over (he is out today sayin 2 year recession).
Nah. What 538 calls pessimism, I call reality. True pessimism creeps in slowly. Hope can create optimism, but it can't change reality.
In an economy, hope and optimism are not without their reality-producing effects, but they are just one factor among many (some of these much more potent). Whatever their role, currently it is diminishing as "reality" (the other overwhelming factors) is sinking in.
Having said that, vis-a-vis real estate prices, I'm not sure the Journal's panel is representative of the average happy-go-lucky buyer of residential real estate.
That these "experts" or the world of real estate bloggers are allegedly overly pessimistic (could be...), it doesn't seem to follow per se that the market is being suppressed in part by a generally-felt pandemic pessimism. I deem it highly likely that the expert and the common (wo)man, don't have the same feelings (at least quantitively) about the state of events. (If they did, what good would it be to be an expert?)
I guess I know too many home owners--all certain the damage is done, and it's time to return to the usual world of steady appreciation. "What a great time to buy!" All in due course.
I guess in economics it's hard to parse "reality" from peoples' perceptions, since behavior and mood drive most spending. I do believe that the world is bounded by hard realities (like the amount of debt the US can sustain before inflation/default occurs) however, and this "optimist vs pessimist" debate is really about where on the continuum we are. My worry is that we're really close to bumping into some hard realities that will constrain policy, and my pessimism derives from the perceived lack of recognition of that worry in our policy leaders.
Maybe I'm wrong. But they've been far wronger than I these past few years, and what they're doing now doesn't give me confidence.
I've pointed this out before - what do we (bubble bloggers) have to gain from being overly pessimistic? Nothing. What does the industry have to gain from being overly optimistic? Everything.
So in terms of which group is more in touch with reality, I'd have to say it's the bubble bloggers, so it's their sentiment I trust most.
This seems to me to be the new version of Phil Gramm's "you're all a bunch of whiners." People should be optimistic? About what? More than half a million people lost their jobs last month. When half a million people get jobs, then I'll be optimistic.
I think Americans in general are overly optimistic and that's one reason why there are so few savers and so many borrowers. If people were more pessimistic about the future they would put something in the bank so their family would not have to suffer in poor economic times. What makes us so optimistic? One major reason is that we have the biggest bombs and the government has used its military might in the past to protect our standard of living. There is no pessimism bubble in the US.
Well, it looks like local state workers have even less to be optimistic about. This cost saving measure seems reasonable enough (see below), but the lack of a budget solution is really starting to piss me off.
Excerpt from Sac Bee on State Government shut downs:
"The monthly two-day furlough represents nearly a 10 percent cut in wages."
BT made an interesting comment in a prior post, something along the lines of she was feeling more hopeful now that everyone admits just how bad things are.
I liked it, because that's pretty much how I feel. It's really hard to make progress on solving a problem if no one will admit that there is a problem to solve.
Perhaps I am more conservative than I am willing to admit, because I look forward to people living within their means and rediscovering the joys of local vacations and sight-seeing, home-cooked meals, and teaching kids fiscal responsibility. I look forward to people moving into a neighborhood and STAYING THERE, raising a family, becoming a part of a community.
The whole "constant growth" thing always puzzled me, as has the notion that we can send all our production to other countries to save on labor costs, but still somehow have a vibrant middle class that can afford to buy those products. Now that the people with the power to make change are questioning those things, it's a relief. I was far more pessimistic when no one would admit what was the plain truth.
Cmyst--
That's one of the fundamental problems of neoliberal economics--if you crash wages for most of the US population, then the goods have to be purchased by someone else. That didn't happen, and US corporations became dependent on people running up debt to sop up that production.
No amount of stimulus will address that problem (unless it leads to rapid wage increases, which is unlikely), and we could end up in exactly the same place we started, except that the accumulated wealth of the population has evaporated.
If the neolibs want to re-run this one, they should have to explain who will purchase their goods.
Weren't the boggers refered to as tin foil hat wearing nutjobs for even suggesting that there was a housing bubble... Now the same people that couldn't see what was clearly in front of them, now have more predictions...
Are house prices going down cause people are pessimistic or are people pessimistic because house prices are going down?
One has only to look at the fundamentals, compare historical data of price vs rent or just the case shiller price index to see that things are still out of whack.
Just like when the bailout was being debated, I remember CNN showing a big chart showing how much money everyone lost in the stock market cause the bailout failed to pass, if only the bailout would have passed we wouldn't have lost all that money in our IRAs. Fast forward a few months and $350B has been used from just that bailout and the stock market is 20% lower than it was before the bailout.
Prices are going to end up where the market dictates regardless of what any blogger (or realtor) says. Home prices will fall in line with what people can afford to pay for them.
We still have a lot of speculation in the market propping up prices. We'll see what happens after this spring. If there is no spring bounce, and nothing left to spin, and no bottom in sight... At some point the investors will leave and we can get the final leg down to the bottom.
Or the government stalls us from reaching the bottom for the next 20 years like Japan did.
In either case there is nothing for me to be optimistic about yet.
We need capitulation before we can reach the bottom. If judges can cram down mortgages that might help. But admitting there was a problem (i.e. a bubble, a recession) is the first step to recovery. But recovery is still a ways off imo.
Post a Comment