Housing Bubble Bursting?

[Steve Owen]

Somehow, I doubt these sources as being accurate or sensitive to the changing home market environment. It does take time, months, maybe a year or more for the public sources with a bias to acknowledge the change has already occurred.

Actually, they probably just don't know. Yesterday, the FOMC said as much. The Fed basically said they don't know what will happen next.

http://www.kansascity.com/mld/kansascity/business/14549063.htm

Unabashed uncertainty was the message from new Fed chairman Ben Bernanke on Wednesday after leading only his second policy session since replacing Alan Greenspan on Feb. 1

However, it was fairly clear that they feel that the very thing many of us feel is a problem may actually be a benefit to the economy:

The Fed statement Wednesday said a gradual cooling of housing probably will help slow the economy’s “quite strong” growth to a “more sustainable pace.”

 

[Couch Potato]

How strong is growth?

I question how strong the growth really is. I am no great economist, but I am old enough to know growth used to be measured by GNP before high trade deficits made GDP more politically palatable. While under the GDP calculation first quarter growth was just over $250 Billion, if the GNP calculation was used the growth would only have been about $50 Billion. With our large trade deficits, it takes substantial growth just to stay even.

 

[JSmith43]

Randolph? Where the heck are you? I have to come out of retirement to clean up this mess???:icon_smile:

Greg: Theoretically, there is a difference and it is enhanced as more citizens work abroad. Generally, there isn't a practical difference.

The important thing when comparing two distinct time periods is to not switch. GDP to GDP works well, IMO.

The balance of payments net is someone's kool aid.

GNP is total production of US citizens at home and abroad.

GDP is total production of US citizens and foreign citizens within our country.

Economists probably switched because at the time, there wasn't much difference anyway, and they could measure GDP more effectively, more quickly and more reliably. GDP & GNP are often used as synonyms in common non geek economist circles, and that probably should stop.

It is a method of accounting we are talking about, and a tweak hear and there can scam the numbers
Remember the S & L maneuver by our fearless government regulators? A mere tweaking of accounting rules allowing paper losses to be essentially amortized, helped prop up S & L's that were below the magic 3% net worth solvency definition.

I guess that regulators can be skippy's too:icon_smile: "A Skippy with a badge", perhaps our worst nightmare.

 

[moh malekpour]

GDP=Gross Domestic product. = Total income from goods and services that citizens of a country can produce in that country within a year.
GNP=Gross National Product= total income from goods and services that citizens of a country can produce anywhere within a year.
Toyota is a Japanese company but its manufacturing plant is in Geogergetown Kentucky.
Profit from the Toyota should be counted GDP for US? GDP for Japan? GNP for US? GNP for Japan? What is the correct answer?

 

[JSmith43]

GDP=Gross Domestic product. = Total income from goods and services that citizens of a country can produce in that country within a year.
GNP=Gross National Product= total income from goods and services that citizens of a country can produce anywhere within a year.
Toyota is a Japanese company but its manufacturing plant is in Geogergetown Kentucky.
Profit from the Toyota should be counted GDP for US? GDP for Japan? GNP for US? GNP for Japan? What is the correct answer?

I believe the Toyota Production in a plant in the USA is part of our GDP under the accounting rules in place.

The reason I like GDP is because it is a measure of how kick *** good anyone has it that comes to the USA to live and/or to do business, compared to elsewhere in terms of current dollars. I think it is measured in current dollars It's not something I think about too often

 

[moh malekpour]

I believe the Toyota Production in a plant in the USA is part of our GDP under the accounting rules in place.

You just answered half of the question. Toyota profit is USA GDP but it is also Japan GNP.

 

[Couch Potato]

Only difference is Imports and Exports.

As I understand the GNP and GDP calculations the only difference is goods and services produced for other countries were added in and from other countries were subtracted out. These are not included in GDP. They were included in the GNP number and traditionally the net of the two numbers was near zero. As the resulting number became a large negative number (imports began to exceed exports by a large amount) the GNP number was "revised" to the new GDP number. Suddenly the economy was growing at a higher rate. :new_Eyecrazy:

Not that anything changed, just the way it was calculated. I believe GNP number is a better calculation and truer indicator. I too think the US is a place of "kick *** good" opportunity, but not as good as it once was and is in danger of no longer being the land of opportunity. Most people fail to understand ever dollar spent by the government comes out of their pocket and there is no such thing as a tax on someone else. The same thinking applies to inflated housing prices. A minor cost like fuel goes up and everyone is concerned, but a major cost like housing goes up and most people don't even understand its a bad thing. In both situations a small number of people make lots of money, but the country as a whole is poorer for the situation.

I guess I should just enjoy my own profits and say "the heck with everyone else, I got mine", but it is not a sustainable trend. As the senior welfare rolls swell (aka social security) something will have to give, assuming falling housing prices and foreclosures don't wipe us out first.

 

[JSmith43]

GDP=Gross Domestic product. = Total income from goods and services that citizens of a country can produce in that country within a year.
GNP=Gross National Product= total income from goods and services that citizens of a country can produce anywhere within a year.
Toyota is a Japanese company but its manufacturing plant is in Geogergetown Kentucky.
Profit from the Toyota should be counted GDP for US? GDP for Japan? GNP for US? GNP for Japan? What is the correct answer?

GDP for US uses profit from any domestically located company as a measure of domestic production

If US economists calculate Japan's GNP, they would include it in the Japanese total. Don't blame me, it's the bean counters!

I actually think that is a good measurement of comparison for our economy from one time period to another.

 

[JSmith43]

I agree with most of your points, Greg & understand cynicism regarding GNP & GDP. My macro-economic training 40 years ago was biased toward GNP

In both situations a small number of people make lots of money, but the country as a whole is poorer for the situation.

I'd like to illustrate how homeowner's benefited by investing in a home, and thusly increased their stake in America: Assume a purchased for $200,000 in 2000 and a sale 5 years later in 2005 for $280,000, assume a net of $80,000.

That particular American sold his home and moved back into rental housing, and, yes, it would take $280,000 for him to become an owner once again. However, he now has approx: 4 Toyota Camry's worth of gain in the bank.

We all have "opportunity cost" to consider if we sit on the sidelines, but at least those of us that did were "safe":icon_smile:

I'm more concerned about sending oil dollars to people that watch it getting pumped out of the ground and little else of productive consequence. I'll even run my lawn mower on home brew and replace my roof shingles with photo-voltaic panels if I get any more ******.:new_ukliam2:

 

[moh malekpour]

GDP for US uses profit from any domestically located company as a measure of domestic production

If US economists calculate Japan's GNP, they would include it in the Japanese total. Don't blame me, it's the bean counters!

I actually think that is a good measurement of comparison for our economy from one time period to another.

there are two different calculations: Toyota is a japanese company but functions in USA. Some of its profit goes to USA and it is USA GDP because it is inside USA and some of it goes to Japan and it is Japan GNP because it is out of Japan. We don't count Japan's profit as ours, we count our own profit.