A Quote by Michael Hudson
Everybody would be better off if they could buy housing for only, let's say, a carrying charge of one-quarter of their income. That used to be the case 50 years ago. Buyers had to save up and make a higher down payment, giving them more equity - perhaps 25 or 30 percent. But today, banks are creating enough credit to bid up housing prices again.
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The myth is that if housing prices go up, Americans will be richer. What banks - and behind them, the Federal Reserve - really want is for new buyers to be able to borrow enough money to buy the houses from mortgage defaulters, and thus save the banks from suffering from more mortgage defaults.
Americans now know that housing prices can go down and they can go down by 10, 20, 30, and in some cases, 40 or 50 percent. We know they can go down. But five years ago, we thought they could only go up.
The standard of 'affordable' housing is that which costs roughly 30 percent or less of a family's income. Because of rising housing costs and stagnant wages, slightly more than half of all poor renting families in the country spend more than 50 percent of their income on housing costs, and at least one in four spends more than 70 percent.
If we had created rules to automatically turn up the required down payment on a home when there's a housing bubble, or just say that the mortgage on a property cannot be larger than the value of the property three years ago, the amount of human misery that would've been avoided would've been enormous.
If you have to pay about forty to forty-three percent of your income for housing, you also have to pay fifteen percent of your paycheck for the FICA for Social Security wage withholding. You have to pay medical care, you have to pay the banks for your credit card debt, student loans. Then you only have about twenty-five or thirty-five percent, maybe one-third of your salary to buy goods and services. That's all.
When they say inflation is bad, deflation is good, what they mean is, more money for us 1% is good; we're all for asset price inflation, we're all for housing prices going up, and we're all for our stock and bonds prices going up. We're just against you workers getting more income.
We all know that housing prices are going up, but what most people don't realize is that this has become a family problem. Housing prices are rising twice as fast for families with kids.
While it's absolutely important that we build housing for our low-income residents, when we are talking about opening up hundreds of sites for housing, we should be trying to build affordable housing for all of our residents struggling to pay rent. That means housing for teachers, for nurses, for janitors.
When regulations on the housing industry are reasonable, the cost of housing goes down. Regulatory relief is needed to make housing more affordable to more Americans.
Banks don't want certain asset classes, and that's created opportunities for private equity, hedge funds, Silicon Valley. In this case I think he was referring to some of the European banks shedding assets, and the big buyers are probably not going to be big American banks. Someone like Blackstone may have a very good chance to buy those assets, leverage them, borrow up a little bit, and do something good there.
Too-easy credit and millions of bad loans made during the U.S. housing bubble paved the way for the financial calamity and Great Recession that followed. Today, by contrast, credit is too tight. Mortgage loans are particularly hard to get, creating a problem for the housing market and the broader economy.
Hans Rosling typically would go into the room, and he would ask the audience questions. Often they had to answer them with clickers or raising their hands or something. We get [data] wrong because 50 years ago that wasn't the case and because we haven't had these graphics we don't realize that over the last 30, 40, 50 years things have changed dramatically. And you see how the world has been getting a better, safer, more homogeneous place. It just has.
Take air quality in the United States today: It's about 30 percent better than it was 25 years ago, even though there are now more people driving more cars.
Fifty years ago or a hundred years ago, generally, most people would buy a house the way you buy a car. When you buy a car, do you think, 'I better buy this year rather than next year because car prices might go up?'
If we all used clotheslines, we could save 30 million tons of coal a year, or shut down 15 nuclear power plants. And you don't have to wait to start. Yours could be up by this afternoon. To be specific, buy 50 feet of clothesline and a $3 bag of clothespins and become a solar energy pioneer.
Citigroup, Bank of America, and JP Morgan Chase should not be permitted to charge consumers 25- to 30-percent interest on their credit cards, especially while these banks received over $4 trillion in loans from the Federal Reserve.
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