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Today we have admonitions from Peter Schiff on housing and stamps. Unrelated topics, except for the continuing refusal of the political class to face reality. Then for comic relief, Dave Barry’s End of the Year Review.
Peter Schiff believes that government interventions have merely postponed a full correction and recovery in the housing market.
…How has the market found the strength to stop its descent? No one is making the case that fundamentals have improved. Instead, there is widespread agreement that government intervention stopped the free fall. The home buyer’s tax credit, record low interest rates, government mortgage-assistance programs, and the increased presence of Fannie Mae, Freddie Mac and the Federal Housing Administration in the mortgage-buying business have, for now, put something of a floor under house prices. Without these artificial props, prices would have likely continued to fall.
Where would prices go if these props were removed? Given the current conditions in the real-estate market, with bloated inventories, 9.8% unemployment, a dysfunctional mortgage industry and shattered illusions of real-estate riches, does it makes sense that prices should simply fall back to the trend line? I would argue that they should overshoot on the downside.
With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher. …
Peter Schiff sees trouble behind a post office policy change.
The United States Postal Service announced this week that all future first class postage stamps sold will be the so–called “forever stamps” that have no face value but are guaranteed to cover the cost of mailing a first class letter, regardless of how high that cost may rise in the future. Currently these stamps are sold for 44 cents, but will increase in price if and when the Post Office hikes rates.
…But the real reason behind the permanent switch is that it allows the Post Office to hide its insolvency behind phony accounting numbers, setting itself up for a massive taxpayer financed bailout in the not too distant future.
Much the way Greece used phony accounting to qualify for euro zone inclusion, the USPS is using creative accounting to avoid making significant cuts in current wages and benefits. By offering forever stamps, the Post Office moves forward future revenues to pay current expenses. But every forever stamp sold today represents a stamp not sold in the future. The revenues booked now will not be put in escrow to deal with revenue shortfalls that are guaranteed to plague the Post Office in the years ahead. This simply kicks farther down the road any intractable fiscal problems that the USPS can’t solve through more conventional means. …
Finally, we locate Dave Barry’s End of the Year Review in the Quad Cities Dispatch.
Let’s put things into perspective: 2010 was not the worst year ever. There have been MUCH worse years. For example, toward the end of the Cretaceous Period, the Earth was struck by an asteroid that wiped out 75 percent of all the species on the planet. Can we honestly say that we had a worse year than those species did? Yes we can, because they were not exposed to “Jersey Shore.”
So on second thought we see that this was, in fact, the worst year ever. The perfect symbol for the awfulness of 2010 was the BP oil spill, which oozed up from the depths and spread, totally out of control, like some kind of hideous uncontrollable metaphor. (Or, “Jersey Shore.”) The scariest thing about the spill was, nobody in charge seemed to know what to do about it. Time and again, top political leaders personally flew down to the Gulf of Mexico to look at the situation first-hand and hold press availabilities. And yet somehow, despite these efforts, the oil continued to leak. This forced us to face the disturbing truth that even top policy thinkers with postgraduate degrees from Harvard University — Harvard University! — could not stop it.
The leak was eventually plugged by non-policy people using machinery of some kind. But by then our faith in our leaders had been shaken, especially since they also seemed to have no idea what to do about this pesky recession. Congress tried every remedy it knows, ranging all the way from borrowing money from China and spending it on government programs, to borrowing MORE money from China and spending it on government programs. But in the end, all of this stimulus created few actual jobs, and most of those were in the field of tar-ball collecting.
Things were even worse abroad. North Korea continued to show why it is known as “the international equivalent of Charlie Sheen.” The entire nation of Greece went into foreclosure and had to move out; it is now living with relatives in Bulgaria. Iran continued to develop nuclear weapons, all the while insisting that they would be used only for peaceful scientific research, such as — to quote President Mahmoud Ahmadinejad — “seeing what happens when you drop one on Israel.” Closer to home, the already strained relationship between the U.S. and Mexico reached a new low following the theft, by a Juarez-based drug cartel, of the Grand Canyon.
This is not to say that 2010 was all bad. There were bright spots. Three, to be exact:
1. The Yankees did not even get into the World Series.
2. There were several days during which Lindsay Lohan was neither going into, nor getting out of, rehab.
3. Apple released the hugely anticipated iPad, giving iPhone people, at long last, something to fondle with their other hand.
Other than that, 2010 was a disaster. To make absolutely sure that we do not repeat it, let’s remind ourselves just how bad it was. Let’s put this year into a full-body scanner and check out its junk, starting with
January
… which begins grimly, with the pesky unemployment rate remaining high. Every poll shows that the major concerns of the American people are federal spending, the exploding deficit, and — above all — jobs. Jobs, jobs, jobs: This is what the public is worried about. In a word, the big issue is: jobs. So the Obama administration, displaying the keen awareness that has become its trademark, decides to focus like a laser on: health-care reform. The centerpiece of this effort is a historic bill that will either (a) guarantee everybody excellent free health care, or (b) permit federal bureaucrats to club old people to death. Nobody knows which, because nobody has read the bill, which in printed form has the same mass as a UPS truck.The first indication that the health-care bill is not wildly popular comes when Republican Scott Brown, who opposes the bill, is elected to the U.S. Senate by Massachusetts voters, who in normal times would elect a crustacean before they would vote Republican. The vote shocks the Obama administration, which — recognizing that it is perceived as having its priorities wrong — decides that the president will make a series of high-profile speeches on the urgent need for: health-care reform.