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Robert Winner

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Economy indicators

The value of my home went down. The tax on my home went up. The price of homes in the USA went up 12.1 percent last month according to the Standard & Poor’s/Case-Shiller 20-city home price index.the most since 2000.

What indications can be taken from this. Is it a good time to buy, sell, rent, or what? Since building permits did not go up ... is this really a sign of recovery or just a shortage of houses on the market causing the prices to rise?

Is this a good economic indicator?

I honestly do not know the answers.

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    Jun 27 2013: Human knowledge on how the economy works is limited
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      Jun 28 2013: I think your right. There are to many factors and some in use give false indications. As was mentioned earlier we will see a growth in employment ... however, that will be false as the work hours are being reset to 25 hours per week in the USA. So many will have two or even three jobs at minimum wages. Even the unemploymebnt figures are unreliable. The National debit clock shows two unemployment rates .... one official and one actual ... one indicates about 8.3% and one shows about 17% plus.

      There appears to be optional rules for calculating and reporting almost everything. I think that is why spin doctors make so much money.

      I once worked in analysis .... I could make the same numbers prove or disprove anything my boss wanted me to show.

      If we saw the real numbers .... all of the people who have had their hours reduced to 25 a week ..... how would they be represented. Is "employed" a forty hour week ... Obama care defines "30 hours a week" as a full time employee for insurance purposes. Are 25 hour employees considered "employed" or unemployed as they would be elgiable for welfare.

      I once sponsored a conversation that the rules for calculating all of these indicators should be standardized so that one number would be presented by all parties making the public aware of the true picture and taking the politics out for both sides.

      Perhaps we have the knowledge .. the truth can damage or help .. the question is ... what is the truth?

      Thank you for your reply. Bob.
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        Jun 28 2013: You are right - A single rule for calculating indicators will reduce the misuse of numbers by politicians. But on the actual point, I think there is a profound problem with what is not knowable about the economy due to changes that are not measurable in mathematical or number terms. Perhaps let me provide a little example with inflation.

        We use Consumer Price Index (CPI) to measures the rate of inflation by looking at change in the price of a fixed market basket of goods and services. The problem is that price changes can be confusing- either an increase in real price or a decrease in quality can be scientifically regarded as price increase. Consider this; I own a bakery and the cost price of a bread loaf is about three dollars and selling price is somewhere around five dollars. When inflation hit (i.e cost of producing my bread goes up) i have the choice of increasing the price or slightly reducing the quality (i.e. the quantity of flour, sugar or other ingredient that goes into the bread, Or perhaps sack the security, decrease salaries or slightly increase working hours). The price of my bread may stay the same with a slight reduction of quantity – there is no way to represent that in the official inflation number.

        Qualitative difference cannot be measured or represented in numbers – this, in my opinion, is the biggest problem in the science of economies as far as indicators are concern.
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    Jun 27 2013: Do you still trust economy indicators, Bob? I have stopped taking them seriously when I learnt that my stay at home mom's efforts to keep our family together never figured in the GDP.
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    Jun 27 2013: It is a bubble created by Bernanke.

    We have discussed inflation not being equal in the past. With the FED created low interest rates there is more cash. Houses around here are selling immediately to investors. They see a better return than in other investments, mostly flippers, some buy and hold as income producing.

    Predicting when the bubble will pop, some say another year or so some say imminent, maybe Didier could predict or Nate Silvers?

    It is not a good indicator. It is an artificial economy that is uneven. Houses have not been able to find a value that allows buyers to buy because the FED has propped up the values.

    It is a good time to sell if that fits with your goals.
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      Jun 27 2013: Pat, I agree. Entering QE3 and no hope of any sort of balance in sight ... the buying of acid loans back from banks at full values and the stimulus packages still being issued while printing more money seem like a formula for a free fall.

      Is the Community Reinvestment Act still a big player. Are banks still being forced to loan to bad risks?

      I went to Wikipedia and read up on Case - Shiller. Just my thoughts here ... no proof ... I think this would have been acurate in the 50 - 80 when people moved and bought homes where the jobs were. The reason I say it is no longer accurate is that the baby boomers bought baloon houses and let them go when the baloons kicked in ... Community Reinvestment Act brought more failures to the table ... boomers retired and downsized leaving big and expensive home to the banks. Flippers must also impact the results. I cannot see any of this factored into the equation.

      I am standing off to the side poking a stick at this .... My fear is that this bubble, a recession, and a depression may all occur at the same general time frame .... if this happens is there any way to recover or are we just screwed.

      Just as further input to the dilemma ... the war against the Bit Coin and all of the lawsuits ... tell me that there is fear at the Fed / banking industry. Could this hasten the fall of the Feds house of cards?

      I really tried to see something positive here ... no luck.

      Thanks for your input. Bob.
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        Jun 27 2013: "Is the Community Reinvestment Act still a big player. Are banks still being forced to loan to bad risks?"

        I don't know about the CRA but that would take some arrogance to try it now. But from what I hear it is hard to qualify for a loan.

        I think Bit Coin is in it's nascent stages, the government doesn't want any competition. I don't know that they actually can stop it anyway.

        I don't know how it will play out but there is nothing to indicate that it is going to be good, the recovery might take generations. The only thing I say for sure is that the more markets can find their real value and the more the country stays open and not isolationist and the less government intervention there is the shorter the recovery.
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          Jun 27 2013: Pat, One last thought. Obamacare has defined the work week as 30 hours for the purpose of insurance ... that has led to companies protecting themselves by reducing the weekly hours to 25. We just saw a community college reduce 1600 adjunct professors to 25 hours. It is happening across the board. The hiring index will look great as people will now have to have two or three jobs to equal one. Job gains will look great but I fear the average income will go down as everyone will be part time.

          This must be a factor .... that is not factored in.

          Do you see this as a major impactor..

          Thanks for the reply. Bob.
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        Jun 27 2013: That was predicted by most.

        The big picture is Bernanke has propped up business that should die.

        The problem is that there is never a "recovery" business just grows in a different direction.

        The vehicle that gets ideas out of someone's garage into a business that shows up on the radar screen is investment. Investor invest on certainty investors fade away on uncertainty. Obama Care and Frank Dodd are both huge creators of uncertainty along with debt and Bernanke make investors fade away. The metaphor I use is that the goverment is eating the seed corn of the future which is why unemployment is so high.
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    Jun 27 2013: Being not an expert on the subject , neither I am US citizen to observe the trend even then I am commenting on the basis of what heard from some of my acquaintances that is

    Some people who has much cash in hand decided to buy property for sometime as the price of property has gone down. That can be the reason of upward trend of property price.

    Sad fact is our economic systems are manipulated in so many varied way that I am not sure whether an expert economists an predict anything correctly if s/he is unaware of prevailing multifaceted manipulation.