Steadfast FinancesRick Santelli Dropping Knowledge Bombs on Real Estate, Deflation, & Government Stimulus

Rick Santelli Dropping Knowledge Bombs on Real Estate, Deflation, & Government Stimulus

Filed in Politics , Real Estate 3 comments

Rick Santelli’s knowledge bombs are one of the few reasons I watch CNBC. He’s one of the few who refuses to hype the pro-confidence, “sell the hope” marching meme that CNBC is promoting these days.

If there are any politicians out there reading this blog — and I know there are — you would do your voters a great service by heeding his words when it comes to macroeconomics, and common sense fiscal discipline.

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I have a 22 year old daughter that’s always drempt of owning a home. Let’s waste billions more artificially keeping the price up.

Forget the humanity.

We made mistakes. We spent bailout money non-prudently.

Let prices come down. Let the flush happen.

Let people buy into the lower prices.

That’s the way it’s supposed to work.

The more money they throw at things, the more deflation the elite champagne economists throw out there to convince people your tax dollars really can keep that anvil up in the air, the more we’re gonna be stuck in the mud for years and year and years.

Bravo sir.

Re-inflating the real estate bubble won’t help, and sector specific deflation would be a healthy thing long term.

Cashing out homeowners who bought at the top using steroid-ish government stimulus programs won’t solve the long term illness caused by the credit bubble where the economy ran at 120% of normal capacity.

Nor will historic new lows in mortgage interest rates because mortgage rates do not matter when potential buyers fear losing their jobs and filing for unemployment.

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Posted by CJ   @   14 August 2010 3 comments
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Aug 15, 2010
8:32 am
#1 Money Obedience :

Real estate has been a charade for a while now. Among other affects, the policies that created the bubble in the first place covered up the fact that income disparity has been increasing since the early 1980s. The bubble allowed average Americans to believe that they too would be or could become wealthy. The gig is up on that ruse, but the government refuses to accept the new realities. The government still thinks that real estate is the key to a blissful and wealthy society. Let the price-setting of markets take a bigger role, have a cleansing and probably overshooting decline in the real estate market, maybe cushion the affects on the real economy, and then regroup to start another boom. Haven’t such declines been the start of something big over and over again in economic history?

Aug 15, 2010
8:54 am
#2 Matt SF :

Well said. I think it’s the “decline” that most in government fear, because periods of economic turmoil have nasty correlations with signaling the fall of great civilizations. Whether or not that fear is legit, or falsely perceived, is the grounds for debate among economists.

As for me, personally, I believe the government really doesn’t care if you become wealthy through real estate, but as long as you take on some form of debt, they have you where they want you.

When you’re in debt, and especially secured debt where you’re going to lose shelter and transportation if you don’t pay up, you have a lower likelihood of causing “trouble”.

There is an old macroeconomic belief that, post World War II, an indebted citizenry is less likely to go on strike (refuse to be productive citizens), and that’s why the US Government promotes home ownership above and beyond other nation states, and even dangles a mortgage deduction on your taxes. Don’t know if it’s true, but it sounds plausible.

Aug 16, 2010
10:00 am
#3 FrauTech :

I think it’s important not to be too optimistic about the housing market or the stock market. But it’s also important to recognize where self interest leads us astray. Clearly Matt you would like to buy and would like real estate to continue to drop even more to help that. Same with the man with the 20 something year old daughter. Since when should a 20 something year old in an early career job necessarily be able to afford a home? I don’t expect prices to go up anytime soon but I hope people will realize that because it’s in their self interest for it to go down might mean they’ll be hyper aware for the pieces of evidence supporting that and overlook a lot of the more moderate estimations.

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