New Entries
Pasadena Real Estate Blog Interviews Dr. Ryan C. Amacher, Professor of Economics
Today we introduce a new article series on our Pasadena Real Estate Blog. The up2date interview series will feature leaders from business and education who will share their thoughts on the economy and real estate.
Our first guest interview is Dr. Ryan C Amacher, from the University of Texas – Arlington. Dr. Amacher is past President of the University, and is currently a Professor in the Department of Economics and Public Affairs. In today’s Wall Street Journal, Dr. Amacher and about 240 of his colleagues have endorsed an ad by the Cato Institute, directed at President Obama, calling for lower taxes and a reduction in the burden of government as a means to stimulate the economy.
Here are the questions posed to Dr. Amacher:
up2date: The original intent of the TARP program was to buy toxic mortgages. It now appears the appropriation is not being spent as intended. Is a real estate recovery dependent upon removal of these bad loans?
“Not really, what is needed is a recovering economy-that will solve the real estate problem. Now is a really good time to buy houses and rent them. If you have the money buy foreclosed homes and rent them. This takes a certain personality to do this, but it would be a good investment”
up2date: I have a theory. Back when money was readily available and when we had a mortgage for everyone mentality, people did not seem to care what they paid for a home. Now that the qualification process is so much more difficult, will we see home prices fall proportionately in line with median incomes?
“People thought prices would continue to rise so they were not worries about what they paid as long as they could get a well priced mortgage.”
up2date: Many homebuyers are still on the fence believing home prices will continue to fall. Once the market hits bottom, do you believe home price appreciation will fall back in line with inflation?
“Yes and inflation will be high. All this debt will be monetized by the Fed and we will have a period of very high inflation – maybe very high. All real assets including houses will rise, maybe a great deal.”
up2date: So many people have seen tremendous losses to their net worth. Evaporating home equity along with stock and retirement portfolios. People have become shell shocked. What must be done to get American’s investing again?
“Confidence. Whatever brings that about. Most people think that FDR’s spending programs got us out of the Great Depression. They did not. It was WWII that ended the depression. Able bodied men went to war and women went to work in the war industry factories!”
up2date: We were all led to believe that our economy was on the verge of destruction if the initial $700 Billion TARP Bailout was not approved. Have there been any benefits at all from this program and what should be the next step?
“None that I have seen. We should cut taxes and let consumers and business lead the way out of the depression. What we have going on is European style Socialism; which is really the goal of many liberal politicians.”
Thank you Dr. Amacher.
In the interest of full disclosure, the author is a University of Texas – Arlington alumni, BBA Marketing – 1981
February 10th, 2009 at 10:18 am
It appears Ryan did not answer all of your questions directly.
However, this response sticks out:
“Yes and inflation will be high. All this debt will be monetized by the Fed and we will have a period of very high inflation – maybe very high. All real assets including houses will rise, maybe a great deal.”
First of all, he should separate the two distinct notions of inflation – one is an increase in that actual supply of dollars, and the second is the total amount of money, virtual or otherwise through leveraged lending, that is circulating through our system. He has not made any case for the increase in actual dollars (i.e. really printing money), so we’ll ignore that effect, especially since it is a small one compared to the second effect.
The second, which is money generated through lending, is something which I think makes his statement ill-thought out. Even if you were to put all of the TARP money out, directly into the hands of consumers (this has NOT been happening) it will still be dwarfed by at least 10X the amount of money that has DISAPPEARED through crazy lending. How in the world he can claim that things will be inflationary is beyond me when the real, actual supply of money has decreased by many times over?
The only way this would be possible is if the US Government (or world governments) could somehow convince everyone, and I mean *everyone* – the banks, investors, hedge funds, to lend crazy amounts of money to consumers at rock-bottom rates with little or no oversight. In other words, repeat 2004-2006. That’s the only way to put over that much money back into the money supply.
Does he really think that’s going to happen? That “real” asset values are going to be skyrocketting to the moon? In order for that to happen, wages will have to start getting out of control like inflation. Maybe in this guy’s world, that’s going to happen, but not here in California, or most any other state I can think of.
I do agree with his points of view that TARP is a bad idea, and that we should let consumers and business lead the way out of the depression. But hyper-inflation? That’s insane.
February 10th, 2009 at 6:46 pm
Wow, it seems Amacher either didn’t answer many of your questions and/or passed off obvious and vague as answers. I’m not really going to get into the hyperinflationary comment as it seems Tim has covered that well… plus, Amacher just gave a simple yes answer with no real elaboration.
I don’t like the stimulus act that’s just been passed, but there is no way this crisis is going to solve itself with just tax cuts and less government spending. There is simply too much lost liquidity and deleveraging of assets for that to be realistic.
If Amacher is anything like many of his 200 colleagues who have put their names in the New York Times Cato Institute ad, his “solution” is likely as bad as the current one passed. Time is a much better alternative. In fact, most of Amacher’s fellow colleagues (unfortunately I don’t know his position) couldn’t even forecast this looming crisis. I know I did, and there are a few real economists who did. It’s simple, housing cannot increase forever, and anyone who believed that or said “hindsight is 20/20″ is delusional.
Lastly, Amacher’s hands off approach didn’t help him to much as President of UTA. He resigned 2 1/2 years in, during an audit, and just before faculty giving him a no confidence vote due to accusations against him of extravagant spending and cronyism. Here’s a link to the article (it’s a bit long but interesting): http://www.dallasobserver.com/1995-01-12/news/fast-times-at-uta/