Comments for Martin Feldstein Strikes Out Again: Big Time at http://www.cepr.net , comment 1 to 24 out of 20 comments http://www.cepr.net Wed, 19 Jun 2013 07:31:48 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12126 Skepto, if you look at the Census population data you will see that it jumps by 2.6 million from December of 1999 to January of 2000. They don't actually think that we had a huge end of the century baby boom or flood of immigrants. They were correcting for undercounting over the prior decade. This means that the ratio of housing units (they should have total, not single family) to population was over-stated through the 90s and hugely understated for the year 2000. Census warns people about this adjustment, but apparently Brad did not take the warning. - Dean Sat, 15 Oct 2011 09:41:58 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12121 Instead of complicated principle reductions for a small handful of people, it would be far better for home owners to repay the full amount they borrowed and for banks to forgive or rebate the interest. And this relief should be available to everyone, not just the unemployed and the under "water." - FGS Fri, 14 Oct 2011 21:51:07 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12120 While Keynes rightly thought of gold as a "barbarous relic" he applauded gold mining as a way to increase employment. He particularly liked the idea that bankers would loan money to mine gold without much regard to the actual ROI. - Paul Fri, 14 Oct 2011 17:37:04 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12118 I don't think it is a major reason for unemployment but it is undeniably true that the market has dissuaded people from moving to new jobs unless those jobs pay much more because of the difficulty of selling homes. if the study doesn't account for this, then it is flawed. - Bill Fri, 14 Oct 2011 17:13:15 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12109 Here are plots of yearly data from the FRED (St. Louis Fed) site: www.skeptometrics.org/StartsPop_2.png The black line is total housing unit starts over total population increase and the red line is 1-unit (single-family) starts over non-institutional population increase (like the one I cited before except with yearly data). I think the red curve is more germane since people in jail don't buy houses (and the difference between the two population numbers is large), and I assume that total starts includes apartments - demand for apartments is mostly complementary to that for houses. The FRED data come from the Census, and seem to agree with what the Census has, but not to the exact number (?). I have not seen what DeLong has done lately. Iglesias has also had some graphs, one apparently the same as the black curve. The current price increase in gold has probably led to an increase in gold mining. When the inevitable crash occurs, will that prove that excessive gold was mined? Asset bubbles transcend supply and demand. - skeptonomist Fri, 14 Oct 2011 04:39:37 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12108 The data cited by DeLong is inconsistent with the Census data on starts, available here http://www.census.gov/const/www/newresconstindex.html. The population has not been growing more rapidly in the 00s than in the 90s and certainly not 30-40 percent more rapidly as his graph implies. I think he misunderstand a correction to the data that was put in with the 2000 Census. - Dean Thu, 13 Oct 2011 21:00:19 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12106 Dean, One thing not commented on is that bankers pursue this "recourse" option to circumvent what many states have a "single-action" on foreclosures. The way I understand is for "single-action" like California, bankers could decide judicial foreclosure or trust deed sale (both are foreclosures). In TD sale, bankers don't go after borrowers for the deficient amount. In judicial, they could and likely will. The time frame between judicial and TD sale is night and days. Just google and you will see it takes over a year to do judicial while TD sale could be done half of that, even if that. So, if the plan is made into law, bankers could foreclose much quicker and go after borrowers as well. What a deal... - James Thu, 13 Oct 2011 17:36:18 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12105 The federal government should offer all Americans a 2% interest rate loan for their primary home. - Earlybird1 Thu, 13 Oct 2011 16:41:42 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12104 Harvard economics professor Martin Feldstein is a fine example of of this quackery. - Scott ffolliott Thu, 13 Oct 2011 16:38:30 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12102 Dean is a classical supply sider now. Since supply creates its own demand, for him there is no reason for the government to stimulate demand for housing. Rather, house prices must fall to clear out the "excess" inventory. At that point, the market will achieve "equilibrium" and prices will stabilize. Of course unemployment by then will be double digits, but then when wages fall, the market will clear out the "excess" inventory of workers too. So the minimum wage, unions and all other impediments to wages falling must be eliminated to solve unemployment and we all become Chinese. David Ricardo explained this all a long time ago. - Paul Thu, 13 Oct 2011 12:13:39 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12101 So what is Dean's entire picture of what's wrong with the economy? Bubble popped, check, now what? Consumers have to repair their balance sheets (BSR, Richard Koo and MMT position), but Dean keeps insisting that consumer spending is still rather high. But median income is down 9.6% from Dec 2007 to June 2011, so it seems that many people must spend a larger share of their income just on necessities and/or debt servicing. Dean had a previous piece about consumer spending a % of disposable income. But that figure is useless without knowing how real income has changed. - joe Thu, 13 Oct 2011 11:17:48 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12098 Give buyers tax incentives for a limited time to buy houses. Jump start the market and get prices rising again to create a virtuous cycle instead of the vicious cycle of price deflation that we now have. - Paulo Thu, 13 Oct 2011 09:49:17 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12097 As I said before, DeLong and some others have claimed that there is actually an undersupply of houses. This is consistent with the ratio of housing starts to populations growth: www.skeptometrics.org/StartsPop.png The rate of house construction was excessively high only for about 2 years at the very peak of the bubble, and for the 5 years since it has been well below normal. Construction is severely depressed and there is no reason to think it is because there was grossly excessive building during the bubble. The objective should be to get the construction rate back near normal, without creating another bubble in prices. I don't have a magic formula to do this, but it seems that serious efforts to clear up the mortgage situation - which must be part of the solution - have been thwarted by bank influence. They don't want to take a short-term hit although reviving housing would be good for them in the long term. - skeptonomist Thu, 13 Oct 2011 09:30:16 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12095 "In other words, the main reason for house prices to decline is simply excess supply." Really? Nobody wants to buy houses because prices are 10% above their historical trend? Has nothing to do with the fact that prices are falling? Obviously Dean has completely abandoned Keynesian principles for classical supply side theory. If housing prices fall another 10%, consumer demand will stagnate if not collapse and unemployment will increase. Keynes advocated increasing consumer demand (The General Theory, p.325) in order to reduce unemployment, but Dean thinks housing prices should fall which will depress demand as consumers wait to buy at the bottom, which may well end up below the historical trend line. Having the government pump up consumer demand is pure Keynesian, but Dean has joined the Evil Empire of supply siders, i.e., supply drives demand. - Paul Thu, 13 Oct 2011 08:34:41 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12094 I agree with most of what you say. However, real home prices are almost back down to trend, only about 2 percent above trend. See this graph (http://img842.imageshack.us/img842/2189/realhomeprices.png), which shows real home prices using CoreLogic data. - Joe Seydl Thu, 13 Oct 2011 08:28:58 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12092 What a bunch of whiny babies! We are expected to have sympathy for folks who looked at a house, liked the price and then bought it and now regret that decision? I have sympathy for the folks who lost jobs, who fell ill, whose divorce left neither party capable of paying. But for those people out there that took the big loans in anticipation of bubbled-up appreciation I have no sympathy. Mind you, there was nothing wrong about their behavior, but when things turned out different than they had hoped that does not make their dilemma a matter that merits a public policy response. Continue paying or default...it's the borrower's decision to make and they don't need my help to decide which one works best for them. - Eric Thu, 13 Oct 2011 06:34:18 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12090 Is there excess housing supply? Census data shows a lot of "doubling up" in homes: Unemployed college grads moving in with parents, two and three generations in what was a single family dwelling. If prices fell 8-10% back to trend, could these families really buy more housing? It looks more like a problem of deferred demand due to a lack of jobs and income. - criv Thu, 13 Oct 2011 06:03:26 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12089 The US govt can borrow at near zero interest rates. A better option would be for the US govt to buy the mortgages at the underwater price and make back most of the difference by financing the housing at a fixed 6 percent rate. The mortgage could be attached to the property so the seller could sell to a buyer who would take over interest payments. Over 30 years, the government would more than make back its investment in interest payments. There are many other ways to "free" the market due to the low costs of BigG borrowing that do not involve gouging consumers. They necessarily cut out the banks from profiting on their bad loans. - bakho Thu, 13 Oct 2011 05:42:22 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12088 Mortgage deficiencies due to foreclosure are dischargeable in a Chapter 7 bankruptcy, so these homeowners wouldn't be debtors for life. Student loans on the other hand ... Well, let's just hope they're federal loans that're eligible for Income-Based Repayment. That way Uncle Sam takes the loss for overpriced degrees. - LSTB Thu, 13 Oct 2011 05:25:31 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/martin-feldstein-strikes-out-again-big-time#comment-12087 Dean, you were on the mark till the last but one para in which you advocate govt spending as a solution for all the problems. Thus far the only folks who have benefited immensely from govt spending are the super rich. The poor get 'visible' jobs briefly. The long term govt employees act like the Greek. I am not against govt expenditure but they need to stay out of all the sectors you had mentioned in your article. The govt is the reason that these sectors turned to be inept or corrupt. - gotgold Thu, 13 Oct 2011 05:24:11 +0100