The Economics of Repossession.
This post is an outline of a critique and policy document I wish to draft on what factors should regulate the actions of financial institutions holding mortgages secured on private homes, several areas of law will be considered as well as the arcane laws of repossession in the event of default. In short a manifeto on property debt reform anticipating a further banking colapse. [edit]
He is also investing in hedge funds that own residential AAA-rated mortgage-backed paper and corporate real estate loans. These credits are selling at just 45 cents on the dollar today. Smith furthermore has a stake in hedge funds that do direct lending to companies.
It is really staggering that this debate has not moved on to the core issue which is should banks through debt money be controlling 97% of the money supply. The Banks should be left to do as they wish they would be rather more prudent if not licensed the Job of providing the money Supply.
Economic replacement cost for industrail stock valuations an unhappy Story, Lets not throw the baby out with the bath water though, Not just Yet.
This post is an outline of a critique and policy document I wish to draft on what factors should regulate the actions of financial institutions holding mortgages secured on private homes, several areas of law will be considered as well as the arcane laws of repossession in the event of default. In short a manifeto on property debt reform anticipating a further banking colapse.
The Price of Everything and the Value of Nothing.
There is an old Saying, so goes the title of this blog, I have googled to find it’s origin here’s a text from the context ( I haven’t googled it yet } First a word on Price and a word on Value.
Are Price and Value the same thing and if not which one is worth more, is worth a measure of Price or a measure of Value or is worth another name for a measure. How circular is this argument in the lexicon of Whats in it for me?
Lets introduce another word, Market, the opposite of the word Market is actually Free Market. I found that suprising but as with Talebs Fragility analogy Anti Fragility so it is with Market the free Market is a sort of Anti Market a market where the artificial boundaries of the Market which suggests order are removed and the Anti Market is the one we all feel a Market Price level will be found.
Is there a difference between the Market Price and the Price of something is there an Anti Price, this is the trouble with Concepts or Constructs when you start off down this road. Anyway lets Google the title and see what happens.
( Let Me Google that for You ) http.
Oscar Wilde. The penalty of Wikiquote.
A thing is not necessarily true because a man dies for it.
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The Portrait of Mr. W. H. (1889)
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The honest ratepayer and his healthy family have no doubt often mocked at the dome-like forehead of the philosopher, and laughed over the strange perspective of the landscape that lies beneath him. If they really knew who he was, they would tremble. For Chuang Tsǔ spent his life in preaching the great creed of Inaction, and in pointing out the uselessness of all things.
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Review of Herbert Giles translation of the works of Zhuangzi (Chuang Tsu) in The Speaker (8 February 1890)
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Consistency is the last refuge of the unimaginative.
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reprinted in Aristotle at Afternoon Tea:The Rare Oscar Wilde (1991)
Those are unrelated the quote we are looking for is about Lord Darlington,
Lady Windermere’s Fan (1892)
What is a cynic? A man who knows the price of everything and the value of nothing.
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Lord Darlington, Act III
Wikipedia Definition Extratcts.
In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.
Price can sometimes alternatively refer to the quantity of payment requested by a seller of goods or services, rather than the eventual payment amount. This requested amount is often called theasking price or selling price, while the actual payment may be called the transaction price or traded price. Likewise, the bid price or buying price is the quantity of payment offered by a buyer of goods or services, although this meaning is more common in asset or financial markets than in consumer markets.
[edit]
SEE ALSO. In Wikepedia.
See also
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Pricing in marketing
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Suggested retail price (also called ‘recommended retail price’)
Wikipedia on Value.
Said another way, value is how much a desired object or condition is worth relative to other objects or conditions. Economic values are expressed as “how much” of one desirable condition or commodity will, or would be given up in exchange for some other desired condition or commodity. Among the competing schools of economic theory there are differing metrics for value assessment and the metrics are the subject of a “Theory of Value.” Value theories are a large part of the differences and disagreements between the various schools of economic theory.
Emergency Pricing Mechanisms For Market Economies.
The Basle Agreement (Basel I) provided for common prudential ratios and a common definition of riskadjusted assets. Bank operating in signatory countries agreed to have capital (equity and long-term debt) equal
to 8% of risk-adjusted assets. Under proposals made in 1993, the percentage adequacy requirement could vary
with an individual bank’s exposure to foreign exchange risks and derivatives. The trademark of Basel I was
simplicity. Risk weights were assigned according to very broad categories of assets. In the case of sovereign
lenders, Basel I provided a simple structure of risk weights based on two criteria: location (OECD and nonOECD) and borrower’s type (sovereigns, banks and corporate borrowers). As a consequence, lending to
emerging markets was subject to considerable differences in regulatory treatment. From the viewpoint of loan
classification, BIS I distinguished credit risk of sovereign, bank and mortgage obligations from non-bank
private sector or commercial loan obligations. Within a given commercial loan classification, no further
differentiation of credit risk exposures was introduced. Today, Basel I framework is still the basis for the
Discounting of Mortgage books of banks in the whole sale market, increases real interest paid by mortgage holders
Distressed Assets as Opportunities, Its an industry, 45 cents on the dollar is the cost of your mortgage.
He is also investing in hedge funds that own residential AAA-rated mortgage-backed paper and corporate real estate loans. These credits are selling at just 45 cents on the dollar today. Smith furthermore has a stake in hedge funds that do direct lending to companies.
“We haven’t seen this kind of opportunity in distressed securities in many years,” he says. “It’s going to be a longer period of distress than prior cycles, and timing is important. There are some bright spots that could be very profitable.”
Banks are Banks on the basis that they have 8-10% capital ratios against the debt they issue. On this basis they issue 97% of the money supply through debt .
In practice with off balance sheet debt creation capital ratios are and have been proven to be more or less nominal purely discretionary inversely proportional to the Hubris of any particular institution.
Replacement Cost Example a Farm Barn.
1983 Article regarding the american Real Economy.
In opposing “an emissions trading scheme”, do you mean ALL emissions trading schemes or just the CPRS ETS in particular?
There are fundamental problems with the trading mechanism for determining the price of emissions. These relate particularly to price volatility and the long time delay between a price signal sufficient to stimulate private sector investment and large scale clean energy becoming readily available on the grid.
When markets need to adapt, grow, or change, faster than their internal feedback mechanisms can respond, they cannot operate benignly – there is no time for “equilibrium” to develop. That is why most markets are suspended during times of emergency (war-time rationing) and some markets are overridden just to get things done.
Relacement Value in distressed prospectus leisure industry
Current market transactions and pricing on these assets would suggest a range from 65,000 per key upwards to 125,000 per key. We would estimate a fair price at about 72,000-77,000 per key (without consideration of full due diligence) for an estimated bid transaction price of $95MM for the portfolio. From a simple replacement cost valuation at 125,000 per key would provide a transaction of about 62 cents on the replacement cost value. This transaction is not a diversified portfolio that fits our parameters, as is too heavy in Southern California, otherwise would be something we would further investigate. Being represented by Jones Lang LaSalle….JLD
Philosophy of Value?
Intrinsic and instrumental value
Many people find it useful to distinguish instrumental value and intrinsic values, first discussed by Plato in the “Republic”. An instrumental value is worth having as a means towards getting something else that is good (e.g., a radio is instrumentally good in order to hear music). An intrinsically valuable thing is worth having for itself, not as a means to something else. It is giving value intrinsic and extrinsic properties.
Intrinsic and instrumental goods are not mutually exclusive categories. Some things are both good in themselves, and also good for getting other things that are good. “Understanding science” may be such a good, being both worthwhile in and of itself, and as a means of achieving other goods.
A prominent argument in environmental ethics, made by writers like Aldo Leopold and Holmes Rolston III, is that wild nature and healthy ecosystems have intrinsic value, prior to and apart from their instrumental value as resources for humans, and should therefore be preserved.
[edit]Pragmatism and contributory goodness
Further information: Pragmatism
John Dewey (1859-1952) in his book Theory of Valuation saw goodness as the outcome of ethic valuation, a continuous balancing of “ends in view.” An end in view was said to be an objective potentially adopted, which may be refined or rejected based on its consistency with other objectives or as a means to objectives already held, roughly similar to an object with relative intrinsic value.
His empirical approach had absolute intrinsic value denial, not accepting intrinsic value as an inherent or enduring property of things. He saw it as an illusory product of our continuous valuing activity as purposive beings. Dewey denied categorically that there was anything like intrinsic values and he hold the same position in regard to moral values — moral values was also based on a learning process; they were never “intrinsic” either absolutely or relativt. (Indeed, a relative intrinsic values is a self-contradictory term; intrinsic values are also absolute or else they are by definition in intrinsive).
Another improvement is to distinguish contributory goods with a contributory conditionality. These have the same qualities as the good thing, but need some emergent property of a whole state-of-affairs in order to be good. For example, salt is food on its own, and good as such, but is far better as part of a prepared meal. Providing a good outside this context is not delivery of what is expected. In other words, such goods are only good when certain conditions are met. This is in contrast to other goods, which may be considered “good” in a wider variety of situations.
[edit]Kant: hypothetical and categorical goods
The thinking of Immanuel Kant (1724-1804) greatly influenced moral philosophy. He thought of moral value as a unique and universally identifiable property, as an absolute value rather than a relative value. He showed that many practical goods are good only in states-of-affairs described by a sentence containing an “if” clause. For example, in the sentence, “Sunshine is only good if you do not live in the desert”. Further, the “if” clause often described the category in which the judgment was made (art, science, etc.). Kant described these as “hypothetical goods”, and tried to find a “categorical” good that would operate across all categories of judgment without depending on an “if-then” clause.
An influential result of Kant’s search was the idea of a good will as being the only intrinsic good. Moreover, Kant saw a good will as acting in accordance with a moral command, the “Categorical Imperative“: “Act according to those maxims that you could will to be universal law.” which resembles the Ethic of Reciprocity or Golden Rule, e.g. Mt. 7:12. From this, and a few other axioms, Kant developed a moral system that would apply to any “praiseworthy person.” (See Groundwork of the Metaphysic of Morals, third section, 446-[447].)
Kantian philosophers believe that any general definition of goodness must define goods that are categorical in the sense that Kant intended.
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Just as John Robb is currently focused on resilient communities afterdiagnosing the dangers of global guerrillas and Tom Barnett prescribed a solution after diagnosing the challenges and opportunities of globalization, apparently Taleb is currently focusing on how to make decisions under extreme uncertainty and how to design “anti-fragile” systems [pdf]. At the crux of his thinking is the point that the opposite of “fragile” isn’t “robustness,” it is “anti-fragility.” A fragile object will be destroyed by a wide range of shocks. A robust object will survive a wide range of shocks. An “anti-fragile” object would actually become stronger when exposed to a wide range of shocks.
Taleb is essentially arguing that we currently suffer from the Mother of All Cognitive Biases: we ignore the potential of building systems that are “anti-fragile” and so the best we aim for is robustness (and we often fail).
This is a fascinating direction of thinking that provides a powerful argument for Robb’s image of resilient communities.
http://www.amazon.com/exec/obidos/ASIN/B000OVLIO2/flatwave-20
These are some reviews of a 2005 book still influential and viewed from todays perspective certainly gives a slant on Libya. Us foreign policy is not a benign force for good it is a cleptocratic hand maid for corporate globalist fascism.
These are some reviews of a 2005 book still influential and viewed from todays perspective certainly gives a slant on Libya. Us foreign policy is not a benign force for good it is a cleptocratic hand maid for corporate globalist fascism.
Roger Glyndwr Lewis
It is really staggering that this debate has not moved on to the core issue which is should banks through debt money be controlling 97% of the money supply. The Banks should be left to do as they wish they would be rather more prudent if not licensed the Job of providing the money Supply.
They have made a lousy job of it getting successively worse since the Big Bang.http://www.positivemoney.org.u/…
The European Commission will not back down from implementing new capital requirements for the region’s banking industry after speculation had grown that the EC was considering weakening the Basel III rules.
Economic replacement cost for industrail stock valuations an unhappy Story, Lets not throw the baby out with the bath water though, Not just Yet.
Replacement cost theory
In modern times – read post liberalisation in 1991 – the Indian equity markets saw many such themes playing out. The first bull market started with Harshad Mehta’s replacement cost theory which argued that old and depreciated companies ought to be valued on the basis of the cost of replacing them.
Using leverage stock prices were rigged to the sky. ACC in those days recording a high of Rs 10,000 is a case in point. As the liquidity dried up, the artificially rigged up prices came crashing own. Blind followers lost out as few could manage a timely exit.
“For retail investors, it is very difficult to time these themes and it is best left to the fund manager,” says K Ramanathan, chief investment officer ING Mutual Fund.
I don’t think this is relevant for a number of reasons
mainly that this is talking about plant and machinery and
whilst buildings have been described as machines for
living in they have different rates of obsolescence etc.
Note of interest here is the idea of longer term financing even intergenerational financing after all what are government debt if not intergenerational financing through taxation more democratic to have longer term time frames this of course poses problems for the current system regarding booking large profits over shorter time horizons I argue that this is a systemic disjoint in one of the basic human rights to Shelter.
This is a theme to be developed regarding Price and Value and the Trading of Mortgage Securities and distressed asset sales as opposed to the more egalitarian course of action which would be to Create some sort of Amnesty on Mortgages ( Principal residence only and even up to a Minimum price say £250k in UK figure could be arrived at by discussion.
The idea that Banks have been caught out more than home owners is perverse. The Banks have created commitments for the borrowers to them and actually not given in return what the Borrowers largely believed I.E that their Mortgage is matched by and equal deposit/ saving of another bank customer. At best the banks have 1 tenth of this covered 10% and in many cases it is more like 1 fortieth 1/40 2.5% so on a mortgage of £100,000
the bank only has capital of at most £10k at risk and in all likely hood more probably £4k at risk. Therefore in distressed sales all on going mortgage payments made should be viewed accordingly and and distressed asset sale again viewed similarly.
I,e a mortgage holder with 25k negative equity on a mortgage of 100k still has an asset worth at least 7.5 x the capital reserve the bank allocated against making that loan. I.E the borrower remains in debt for 100k a new debt of 75k is created and and the bank gets all its basic capital back has had the interest in the meantime and will still milk the original borrower through the Bankruptcy process for a further 2 years representing further pure profit.
Other commitment bank have created beyond the reserve ratios based on trading these very profitable rights to receive mortgage payments cause the banks to be insolvent but compound the extent to which the original deceit is leveraged to the cost of the Mortgage Payer who is also the future tax payer for the government debt taken on the Save the banks from their excesses with their derivatives based upon the imaginary debt money they are licensed to create in the first place.
LAST PARA TO BE WORKED UP INTO FULL MATHEMATICAL PROOF.
In 1860 John Ruskin published a critique of the economic concept of value from a moral point of view. He entitled the volume Unto This Last, and his central point was this: “It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as strictly as that of a mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery.” Gandhi was greatly inspired by Ruskin's book and published a paraphrase of it in 1908.
Re: Mortgages – Grip of Death or Total Scam or Both?
by RogerGLewis » Tue 31st May, 2011 (06:30)
I'm with the grip of death view on this and have been looking into the Legal Concept of Usufruct.http://en.wikipedia.org/wiki/Usufruct
Banks Take a legal Charge over the property a mortgage is secured against. The mathematics of how the Money they Create to allow the transaction to take place is an illusion, certainly the bank is somewhat less exposed than the Householder.
I am working on a Pamphlet/Paper to address the Laws of RePossession, Fixed Charge Receivership.
Here is a blog of my Notes on this they are wide ranging and so far I am thinking out loud, but the transaction from the Banks perspective when there is a repossession is something like this.
This is a theme to be developed regarding Price and Value and the Trading of Mortgage Securities and distressed asset sales as opposed to the more egalitarian course of action which would be to Create some sort of Amnesty on Mortgages ( Principal residence only and even up to a Minimum price say £250k in UK figure could be arrived at by discussion.
The idea that Banks have been caught out more than home owners is perverse. The Banks have created commitments for the borrowers to them and actually not given in return what the Borrowers largely believed I.E that their Mortgage is matched by and equal deposit/ saving of another bank customer. At best the banks have 1 tenth of this covered 10% and in many cases it is more like 1 fortieth 1/40 2.5% so on a mortgage of £100,000
the bank only has capital of at most £10k at risk and in all likely hood more probably £4k at risk. Therefore in distressed sales all on going mortgage payments made should be viewed accordingly and and distressed asset sale again viewed similarly.
I,e a mortgage holder with 25k negative equity on a mortgage of 100k still has an asset worth at least 7.5 x the capital reserve the bank allocated against making that loan. I.E the borrower remains in debt for 100k a new debt of 75k is created and and the bank gets all its basic capital back has had the interest in the meantime and will still milk the original borrower through the Bankruptcy process for a further 2 years representing further pure profit.
Other commitment bank have created beyond the reserve ratios based on trading these very profitable rights to receive mortgage payments cause the banks to be insolvent but compound the extent to which the original deceit is leveraged to the cost of the Mortgage Payer who is also the future tax payer for the government debt taken on the Save the banks from their excesses with their derivatives based upon the imaginary debt money they are licensed to create in the first place.
LAST PARA TO BE WORKED UP INTO FULL MATHEMATICAL PROOF.
The FUll Blog is here.
http://letthemconfectsweeterlies.blogsp … essed.html
There are very few duties that the Banks have created by precedent and they are statutorily licensed to do something basically beyond legal in any other walk of commerce. There is great potential for a great day in Court for a Test Case to challenge the basis and industry of Repossesion and its arcane and bullying laws.
Yep I am definitely a death gripper.
Roger Lewis • This is a very interesting Paper on where the Risk now lies and how it is ranked in the “top 10 to big to failers.”
http://pragcap.com/10-banks-which-pose-the-greatest-systemic
Short Answer, the Banks are shakier now than they were in 2006!
An interesting article in the Guardian newspaper on how the banks are planning to chart a course out of their present Bankruptcy by infecting our own Sovereign Economies.
http://www.guardian.co.uk/commentisfree/cifamerica/2011/may/27/economics-useconomy
Rather than letting them Fail slowly taking so many innocent people with them my suggestion is we push them over the edge re build the system with a debt jubilee swap of all on shore liabilities.
As suggested here.
http://golemxiv-credo.blogspot.com/2011/05/how-to-destroy-web-of-debt.html
There is more than one way to Skin this particular Cat we need a Manx/come Austrian approach. Manx Cats have no tails ( the investment Bankers are not required at the Table of National Finance Sovereign Interests must assert their Authority. Enough is Enough!
19 hours ago
Roger Lewis • http://www.economist.com/blogs/freeexchange/2011/04/financial_markets_0?fsrc=scn/li/nw/bl/toobigtofail
Fantastic Presentation on this issue!
18 hours ago
Follow Ricardo
Ricardo Galeno • I agree, Andy.
13 hours ago
Dr. Waleed Ahmad
Stop Following
Dr. Waleed Ahmad Jameel Addas • Safe as long as usury/interest is flushed out from its system and replaced with profit and loss sharing which is a more just financial system that support the real economy in the form of asset and wealth creation. See the principles of Islamic finance for more details.
12 hours ago
James
Stop Following
James Vaughn • Roger, there may be one wisdom in pushing the banks over the edge. It would free up the real estate they now hold and refuse to sell at market prices. If we were to dump the entire inventory of foreclosed homes onto the market it would provide affordable home ownership for millions and clear the ongoing real estate crisis.
7 hours ago• Reply privately• Flag as inappropriate
ishtiaq
Stop Following
ishtiaq farooq • @James.
Banks are busy in a dramatic financial gym exercise,only surviving on daily basis,losing a vital inch each day.The Interest 'whirlpool' not far,to be covered on daily basis.
Dr.Waleed may be right in the observation.However, IF may have 'Principles' ,the theory not 'Practice'.
It is learnt that Punjab Assembly,Pakistan,having made a Law in 2007,is moving to implement that in the Province through Bai Salam.In my humble opinion that may be first 'application' as in Shariah.The Committee,after a series of meetings, may call IBs to indicate level of their intention.That may be 'breaking news' even for 'Economist'.The mover may be contacted as .She is MPA who got the bill of 2007 passed and then the Act.
31 minutes ago
Roger Lewis • James there is a problem with that ( only regarding the real Estate problem) as the Mortgagees in possession laws in UK and Foreclosure laws in the US do not make any provision for the conflict of interest inherent in the Fractionally reserved based banks ( Low capital exposure ) 4% in all truth ,and the
honest home owners who would be bankrupted by negative equity in a crash in which their role has been purely incidental and manipulated. ( always protect the innocent, I do not include myself in that category by the way.)
I am writing a pamphlet seeking reform of the rules of valuation on these matters in the event of wholesale collapse. My view is that the strangulation of the money supply is partly designed to force that collapse in any event my proposals would head the Banks off at the pass so to speak.
This is my basic premise.
The idea that Banks have been caught out more than home owners is perverse. The Banks have created commitments for the borrowers to them and actually not given in return what the Borrowers largely believed i.e that their Mortgage is matched by and equal deposit/ saving of another bank customer. At best the banks have 1 tenth of this covered 10% and in many cases it is more like 1 fortieth 1/40 2.5% so on a mortgage of £100,000
the bank only has capital of at most £10k at risk and in all likely hood more probably £4k at risk. Therefore in distressed sales all on going mortgage payments made should be viewed accordingly and and distressed asset sale again viewed similarly.
I,e a mortgage holder with 25k negative equity on a mortgage of 100k still has an asset worth at least 7.5 x the capital reserve the bank allocated against making that loan. I.E the borrower remains in debt for 100k a new debt of 75k is created and and the bank gets all its basic capital back has had the interest in the meantime and will still milk the original borrower through the Bankruptcy process for a further 2 years representing further pure profit.
Here are my original sketches and sources notes etc on my blog.
http://letthemconfectsweeterlies.blogspot.com/2011/05/further-thoughts-on-distressed.html
One final Link which I think points a finger at the banks and their cynical exploitation of the real economy.
http://www.guardian.co.uk/commentisfree/cifamerica/2011/may/27/economics-useconomy
This post does not do justice to this small aspect of the overall picture and in itself could fill several books.
1 second ago• Delete • Edit Comment You have 14 minutes