Property Taxes Going Up, MythBusters, Central Banks, and How Our Inflation Compares To Japan
What Has Been Seen?
Well, quite a lot actually. After the bailout passed, the Dow continued to crash, and we’re seeing how things are affected on a world scale… what else is going on?
Looks like property taxes will be going UP, not down for Arizona residents:
Maricopa County homeowners saw an average 3.9 percent tax increase at a time when real-estate values are dropping and foreclosures rising, said county Treasurer Charles Hoskins. That’s because this year’s bills are based on peak valuations set by the Maricopa County assessor two years ago. How much the taxes went up – or if they went up – depends on the spending practices of local cities, schools and special districts.
Myth Busted: “It’s been sort of folklore in the industry that people always pay their home mortgage or auto loan first”:
In the study, researchers looked at thousands of borrowers who had taken out mortgages in 2002 and 2005 and tracked their payment behavior over a 24-month period. Of those in the 2002 sample who missed two payments on their mortgages during the two years, 26 percent maintained a spotless credit-card payment history and 59 percent kept pace with car payments.
Mortgage payments continued to slide down the list of priorities a few years later. Of those in the 2005 sample who fell behind on their mortgages, 38 percent kept up with credit-card payments, and 62 percent made all their car payments.
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These borrowers did not lack financial sophistication, Ms. Hart added. “The people who were delinquent on their mortgages but who paid their credit cards on time tended to have higher credit scores,” she said.
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Meanwhile, borrowers who neglect their mortgages could be doing so because they think banks or the government will help keep them in their homes.
Global Rate Cut? Looks like Central Banks are saying this economic fire requires a global response:
The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis.
The Fed, ECB, Bank of England, Bank of Canada and Sweden’s Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn’t participate in the move, said it supported the action. Switzerland also took part. Separately, China’s central bank lowered its key one-year lending rate by 0.27 percentage point.
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“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” according to a joint statement by the central banks. “Some easing of global monetary conditions is therefore warranted.”
Interest rate skeptics: We have lived beyond our means for too long. Are interest rate cuts appropriate? Also – Inflation and Japan:
Japan’s experience suggests that, sometimes, interest rate cuts simply don’t work. It is not difficult to see why. When a bubble bursts, asset prices, by definition, collapse. Even if interest rates do fall to 0 per cent, there is not much point borrowing if you and everybody else think asset prices are more likely to fall than rise. Why buy a house, for example, if you think house prices are persistently falling (one reason why last week’s stamp duty announcements from the UK Government were met with such derision)?
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Where, I suspect, the interest rate sceptics are right is in the idea that we have lived beyond our means for far too long. But does this mean that interest rate cuts now are inappropriate? In one sense, yes, because interest rate cuts create the illusion that, despite our collective profligacy, we can all be bailed out by the central bank. But, in a more worrying sense, no, because much depends on the likely impact of lower interest rates. Monetary policy works a bit like the lights in your kitchen. Flick the switch and, in normal circumstances, everything is illuminated. What happens, though, if a number of light bulbs have gone? Then, flicking a switch doesn’t have quite the same effect.
The issue, then, is not so much whether interest rates should come down but, rather, whether reductions will be both effective (by boosting demand) and safe (by avoiding inflationary risks). Japan’s experience in the early 1990s suggests that, in the aftermath of a bubble, only the second of the conditions is likely to be met. From an inflationary point of view, rate cuts may be safe – because banks are simply unable to lend – but, from a demand perspective, rate cuts may be ineffective – again, because banks are unable to lend.
Check Out Some Related Posts
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- The Five Most Dangerous Mistakes You Can Make Renting A House That Can Cost You Thousands And Lead To Eviction
- Sign Of The Times: You Know Things Are Tough When The 99 Cent Stores Have To Raise Prices!
- Ron Paul Speaks Out Against The 2008 Bush Administration’s Federal Bailout Plan – Why It Will Not Work And How It Will Hurt You Even If You Have No Money Invested In The Market
- Real Estate Sales Hit A 10 Year Low – Almost One-Third Of Buyers In The Last Five Years Owe More On Their Mortgages Than Their Houses Are Worth
- Ever Wonder Who Caused The Housing Bubble To Be As Bad As It Was? It Was Mortgage Brokers Like This…
- Arizona Foreclosures Dropped A Bit In July, But Are Still Up 95% over 2007
- A Bright Light Among The Gloom: A Foreclosure Story That Actually Worked Out
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