Comments on: Nouriel Roubini and Willem Buiter Both See Downside Economic Risk http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html Sun, 22 Nov 2009 18:20:39 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Moopheus http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html#comment-1607 Moopheus Mon, 12 Nov 2007 17:08:00 +0000 http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both-see-downside-economic-risk/#comment-1607 "A writeoff, or foreclosure has no economic impact beyond the wealth transfer from the chump lender to the borrower?"<br/><br/>Maybe I am missing something (IANAE), but isn't the transfer from the lender to the guy who sold the house at an inflated price? He's the one walking away with the cash. The borrower doesn't have either the money or the house if he gets foreclosed on; he has bupkis. <br/><br/>Of course, the seller may have gone and spent his gains on an even bigger house he couldn't afford either... “A writeoff, or foreclosure has no economic impact beyond the wealth transfer from the chump lender to the borrower?”

Maybe I am missing something (IANAE), but isn’t the transfer from the lender to the guy who sold the house at an inflated price? He’s the one walking away with the cash. The borrower doesn’t have either the money or the house if he gets foreclosed on; he has bupkis.

Of course, the seller may have gone and spent his gains on an even bigger house he couldn’t afford either…

]]> By: Anonymous http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html#comment-1602 Anonymous Mon, 12 Nov 2007 13:54:00 +0000 http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both-see-downside-economic-risk/#comment-1602 It seems the economic theory cited by Buiter would suggest that the real balance sheets of home-owing households include housing liabilities (future services consumed) equal to housing assets (real estate value). This implies owner occupied houses contribute 0 real net equity to household balance sheets.<br/><br/>Does such a theory square with the fact that residential real estate is ‘collaterizable’ (which he acknowledges)? Would housing be collateralizable if the act of doing so actually created a net negative equity position with respect to housing? It seems the economic theory cited by Buiter would suggest that the real balance sheets of home-owing households include housing liabilities (future services consumed) equal to housing assets (real estate value). This implies owner occupied houses contribute 0 real net equity to household balance sheets.

Does such a theory square with the fact that residential real estate is ‘collaterizable’ (which he acknowledges)? Would housing be collateralizable if the act of doing so actually created a net negative equity position with respect to housing?

]]> By: John http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html#comment-1600 John Mon, 12 Nov 2007 13:26:00 +0000 http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both-see-downside-economic-risk/#comment-1600 “ All these derivative claims are ‘inside’ financial claims – for every creditor there is a matching debtor. These write downs and write-offs do not in and of themselves destroy any net wealth....”<br/><br/>This misses the point that wealth was consumed/destroyed in the real economic actions, e.g. homebuilding, that was financed. “ All these derivative claims are ‘inside’ financial claims – for every creditor there is a matching debtor. These write downs and write-offs do not in and of themselves destroy any net wealth….”

This misses the point that wealth was consumed/destroyed in the real economic actions, e.g. homebuilding, that was financed.

]]> By: Anonymous http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html#comment-1599 Anonymous Mon, 12 Nov 2007 13:13:00 +0000 http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both-see-downside-economic-risk/#comment-1599 “ All these derivative claims are ‘inside’ financial claims – for every creditor there is a matching debtor. These write downs and write-offs do not in and of themselves destroy any net wealth....”<br/><br/>Isn’t this the same reasoning as used in the Ben Stein piece earlier? I suppose it’s technically true if you include the debtor’s liability position only. It’s not true when you consider the associated overall change in the debtor’s equity position, including related deterioration in assets such as housing. “ All these derivative claims are ‘inside’ financial claims – for every creditor there is a matching debtor. These write downs and write-offs do not in and of themselves destroy any net wealth….”

Isn’t this the same reasoning as used in the Ben Stein piece earlier? I suppose it’s technically true if you include the debtor’s liability position only. It’s not true when you consider the associated overall change in the debtor’s equity position, including related deterioration in assets such as housing.

]]> By: Yves Smith http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html#comment-1596 Yves Smith Mon, 12 Nov 2007 09:19:00 +0000 http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both-see-downside-economic-risk/#comment-1596 steve j,<br/><br/>Touche. steve j,

Touche.

]]> By: Steve J. http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both.html#comment-1595 Steve J. Mon, 12 Nov 2007 09:05:00 +0000 http://www.nakedcapitalism.com/2007/11/nouriel-roubini-and-willem-buiter-both-see-downside-economic-risk/#comment-1595 <i>are first and foremost a redistribution of financial wealth from creditors to debtors.</i><br/><br/>I thought the ones who made the money on this crap were the ones who bundled the mortgages and the ones who sold the mortgages. are first and foremost a redistribution of financial wealth from creditors to debtors.

I thought the ones who made the money on this crap were the ones who bundled the mortgages and the ones who sold the mortgages.

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