I am a downsider and contrarian, and cheap.
Some look for gains, but few have the smarts, so they buy into words.
When your house is going up at 20% a year, sell, for long term, 3% is closer, so they were selling future increases.
You are much better off owning stock that drops by half, which can be sold tomorrow, than being stuck with a house that cannot be sold, and has high running costs to keep.
The problem comes from people. The Government was promoting home ownership, Three bedroom two bath $150,000. Builders and realtors, bankers, wanted to sell $450,000 homes.
With median income at $50,000, and housing at five times income, $250,000, it is debt servitude.
Crossing over that line took rising prices to sell more units, and the suckers bought.
For a program designed to stop the redlining of minority neighborhoods, make mortages available, it did, low income people did make great gains in becoming home owners, in their old neighborhood. With a low down payment and long terms, they became owners of some of the cheaper homes, and they are the good ones, still making payments.
The problems come from the equal part of the law that let desert developers in Arizona build hundreds of $500,000 homes, which speculators then bought to flip. California, Nevada, Arizona, Florida, are most of the problem.
The price of a house in Texas has hardly changed, even in Austin where Dell has laid off many by shifting production offshore.
There is hardly any mortgage money, surplus housing, but they did not see the 50% price drop.
The basic problem is too much money, looking for a place to invest, and few investments. Oil is considered to be 50% people seeking a shelter, which drives the price up. We have not had inflation, but gold tripled.
There are no good investments, except tulip bulbs, for at one flower a year, limited production, sells for more every year, and the bulb produces another the next. Tulip Ranches are the future, and with modern DNA knowledge the Black Tulip will soon be possible, and think what that will sell for.
Over time investments in the market double in 7 years and nine months, and the value of money declines by 50% in the same time.
Losses can be seen as a good thing because they reduce the money supply. In our economy losses are easier to generate than wins.
The simple version, there is one pie, it is cut into smaller pieces, which sell for more, and then they are the pie cutting fees, but there cannot ever be more than one pie.
While Wall Street and the Governments are Self Regulating Ponzi Schemes, all needing new investors to pay off the old, there are limits to growth.
In 1300 Ibn Khaldun documented how all governments and economies before his time had fallen. All after his time have followed the same path, consuming resources, over regulating, and devalueing the money.
Almost all last less than 100 years, the only ones that have lasted longer were the looters, Rome, Spain, England, America, who pillaged other lands and people.
Rome fell to Chinese silk, they would only take gold and siver in payment, in 100 years Rome was issuing bronze and lead coins.
Spain looted so much gold in the Americas that it drove down the price of gold in Europe. They spent it on Chinese silk.
England and it's sub company America looted other peoples lands for raw materials, and markets for manufactured goods. Since Ghandi wove his own cloth, made his own salt, that has not been working.
Locating factories in China only had them studied, copied, and the copies went after the same market, with over a billion people and cheap labor.
We import more manufactured goods from China than what we spend for imported oil. It has been a long time since our exports exceeded our imports. Our China credit card bill is near a trillion, and rising. Just the interest paid on their Treasurys is $30 billion a year on the debt. Last year they stopped taking our IOUs.
We are supporting the economy by war, a billion a day, some two trillion that mostly went to keep war production factories going. It was only a small part of the defense budget.
Rome had the same problem, Caligula could not pay for the grain and oil Rome bought from Numidia, so he went to war with them, one way out of a debt. Claudius inhereted the war, and found he could not stop it without caving in the economy. After seven years they won, and that caved in the economy.
By the official fall of Rome, 410, the small group of invaders report few people, many living in the tombs built outside the city, and no local force able to fight. It was a ruins, they left.
For the next 500 years there are no books, and only local village and tribal governments.
Khaldun was writing at the end of the golden age of Islam, 1100 to 1300, and he knew it. Just as he predicted the Turks came and took over. Being a primitive people from the steppes, they thought only of gold and silver, and limited enforced law in the market place, they lasted six hundred years.
One cannot get out of history.
13 Sep 2009, 12:46 pm
