patrick.net

AA says

"ghost"

G-g-g-g-g-g-g-ghost towns! Scooby, I don't like the sound of that.

AA says

Here is an interesting news video on youtube about "ghost" developments in CA.

The destruction of real wealth described in the video is exactly what we all predicted would happen if the government didn't just let housing prices fall. None of this crap would have happened if the government didn't bail out the big banks and prop up housing prices.

The housing bubble ended five years ago, and we're still paying the price. Hell, I'm voting for The Rent is Too Damn High Party.

simchaland: I don't think all of California will fall overnight, but the statistics are alarming. I own a small business here and I would never be able to grow unless I moved elsewhere. I would go bankrupt if I tried to expand here. I like the area, but I have to keep it small. Many other small business owners say the same. There are old, established large firms that may always stay, but many are leaving. As far as fun interesting and desirable places, I couldn't believe it when media staple, TV Guide, moved from Hollywood to Oklahoma. I also couldn't believe it when AAA Southern California moved to Texas. How can AAA California be located in Texas?? Do an google search on "businesses leaving California, 2011". It is eye-opening. As far as urban decay goes, upscale coastal cities appear ok, but have a look at inland cities and farm communities throughout the state. The rate of decay is dramatic.

AA says

21% of small business plan to leave California within the next three years. With California's hostile business environment, this migration will will continue.

This is nonsense. I already posted actual numbers showing that the number of businesses in California rose from 2006 to 2009. It looks like the number has gone down slightly for 2010 Q3:

2006: 1,265,268
2007: 1,304,291
2008: 1,337,920
2009: 1,347,245

Even in the worst economy since the Great Depression, the number of businesses in California has increased, although growth has certainly slowed because of the economy.

http://www.labormarketinfo.edd.ca.gov/?pageid=138

The number for Q3 of 2010 (all the others are also Q3) is 1,344,480. If you delve into the numbers, you will see that businesses with 0-4 employees declined by almost 5,000, businesses with 5-99 employees (small businesses!) rose, businesses with 100-499 employees declined, and businesses with 500+ employees went up.

As you can see, the 5,000 0-4 employee businesses disappearing drove down the overall number. Why would 0-4 employee businesses disappear in 2010? Maybe because the number of independent contractors went down because some of them got jobs.

As you can see, the number of businesses with 5-99 employees went up -- in all four categories, 5-9, 10-19, 20-49, and 50-99.

Some of the stats you're giving are probably questionable, like Rick Perry's:

http://www.politifact.com/texas/statements/2010/nov/18/rick-perry/gov-rick-perry-says-153-businesses-have-moved-cali/

AA says

The relatively high paying jobs, such as provided by Apple Computers and TV Guide have abandoned California. Apple relocated its headquarters to North Carolina

Are you high? The company building a new HQ building in Cupertino, CA? I believe Apple has a data center in NC, but it has not relocated its HQ. The fact that you said this makes you lose all credibility in the rest of what you say.

AA says

TV Guide moved everything to Oklahoma.

False, as well. Where do you get your information? TV Guide Magazine is based in NY and started out in Radnor, PA. TV Guide Interactive is based in Tulsa. TV Guide Network is based in Los Angeles.

Regulation and taxes do make a difference in where businesses locate, no doubt. However, there are other factors that matter too. California offsets some of the negative factors by having a deep job market with lots of high-skilled workers and by being a desirable place to live.

I doubt you live here.

AA says

I also couldn't believe it when AAA Southern California moved to Texas. How can AAA California be located in Texas?? Do an google search on "businesses leaving California, 2011"

AAA of Southern California, eh? You did realize that the Auto Club of Southern California owns AAA Texas, AAA Hawaii, and AAA New Mexico, didn't you? I bet you didn't. I believe it's also affiliated with AAA Northern New England, AAA Missouri (which covers several states, not just Missouri), and AAA Alabama.

So it would be quite logical that the Auto Club has had employees in Texas ever since it bought AAA Texas, wouldn't it? It has since moved some back office and call-center stuff to its Texas office, by some estimates about 350 employees over the last 6 or 7 years since they moved AAA Texas from Houston to Irving. The Auto Club of SoCal still has more office space and employees in Costa Mesa than it does in Irving, TX -- almost 5X the office space in Costa Mesa (http://realpoints.dmagazine.com/2011/04/buzz-whats-next-for-aaa-texas/).

In short, you don't really know what you're talking about. And your Google search returns 5 results, none of which say all that much.

Dan8267 says

The destruction of real wealth described in the video is exactly what we all predicted would happen if the government didn't just let housing prices fall. None of this crap would have happened if the government didn't bail out the big banks and prop up housing prices

You've got to be kidding. There's a good chance we wouldn't have an economy in the US without some sort of bailout.

Do you think things would have magically worked themselves out?

corntrollio says

California offsets some of the negative factors by having a deep job market with lots of high-skilled workers and by being a desirable place to live.

"desirable place to live" doesnt translate into a budget or forecast number. High home costs has been sinking our ability to compete and attract skilled labor.

I cant say, where GE or IBM has its center of R&D. They are scattered nationally and globaly. Today HP, Intel, Oracle, Seagate and many others are also scattered globally.

Plenty of people would leap at the oppurtunity to work for Intel or HP regardless of where the job is located. So if you dont like Washington, Arizona, or Nebreska, someone else will.

corntrollio says

The company building a new HQ building in Cupertino, CA?

That may not happen given Emporer Nero is gone. Jobs was married to Cupertino, Cook is from Alabama. We will see how it goes. But like every other great campus in our history, doesnt go far.

We have a relative in our family. She relates everything to how it was back in the 1950's be it child rearing, the labor market, or prices. Needless to say, she things that EVERYTHING is overpriced because of her frame of reference. I don't want to get into the same trap with my thinking on houses.

Late 1990's this area was somewhat undervalued. By 2003 it was overvalued - then it just got crazy. But if I keep my frame of reference as "what prices were in 1998" - then prices will always look overpriced by comparison. For example in my school district, I can find a half dozen or more 3 bdrm / 2 bath houses, each on about 0.5 acre for an average asking price of about $280k in my area. Now if you ask me my valuation - I'd say they aren't worth much more than $220k - heck they sold for $160k back in 1998.

Therein lies the rub. If they are selling at or near $280k - then perhaps the problem has shifted from "housing prices are too high" to "I have underestimated the price the market will bear."
I'm not timing the market - I'm looking for value. Its a big purchase - I want to feel like I'm "getting my money's worth."
But if I get in the mental trap of using an outdated frame of reference - everything seem expensive by comparison

tatupu70 says

You've got to be kidding. There's a good chance we wouldn't have an economy in the US without some sort of bailout.

Do you think things would have magically worked themselves out?

We certainly would have an economy w/o bailing out the big banks. People still make stuff. Banks, on the other hand, produce nothing. At best they facilitate the movement of money. At worst, they impede it.

Had the "too large to fail" banks been allowed to fail, all the "too small not to fail" banks would have eaten up the assets of the too big banks at a steep discount. This would be the economic equivalent of the small, agile mammals taking over from the slow, lumbering dinosaurs after the asteroid strikes.

Our economy would be far better off as the big banks could not continue to hold it hostage, borrow at 1% and loan to the gvt at 6%, and keep housing inventory off the market. The rapid re-adjustment to housing prices would have allowed so-called "fence sitters" to buy a house and have money left to furnish it. The economy would start moving again.

Right now, we have executives in these too big to fail banks keeping the losses off the books for as long as they can. That is why we are experiencing a lost decade similar to Japan's.

If we had let the lumbering, foolish dinosaur banks die and be eaten by smarter, smaller banks, unemployment would not be as high as it is now. We would have had two years of recession 2007-2009, and then a recovery. As it stands, we'll be in this depression for at least another five years if not more unless something drastic changes.

Dan8267 says

unemployment would not be as high as it is now. We would have had two years of recession 2007-2009, and then a recovery.

utterly wrong.

Again, it was consumers taking on trillions of debt:

http://research.stlouisfed.org/fred2/series/CMDEBT

that gave us the economy of 2002-2007.

While I have been recently re-thinking my views on TBTF, I do still remember the summer of 2008 and thinking that the Indymac failure was going to be the first of very very many.

You can talk about assets being liquidated, but these assets are the flipside of the banks' liabilities, which were -- and are -- everyone's fucking money we've given them to keep.

The rapid re-adjustment to housing prices would have allowed so-called "fence sitters" to buy a house and have money left to furnish it.

The housing sector is sick for other reasons, not the banks. We had abused it 2002-2007, and now it's not going to work for us any more.

Bellingham Bill says

http://research.stlouisfed.org/fred2/series/CMDEBT

that gave us the economy of 2002-2007.

Troy, that graph scares the shit out of me.

thomas.wong1986 says

"desirable place to live" doesnt translate into a budget or forecast number. High home costs has been sinking our ability to compete and attract skilled labor.

Which of course I acknowledged in my post. You don't really seem to do well with shades of gray -- I said that it offsets somewhat, and I didn't say that "desirable place to live" is the number one factor or anything. As another example, many California colleges get better professors than school rank would otherwise dictate simply because of the desirability of living here. But cost of living is still a big negative, obviously.

thomas.wong1986 says

That may not happen given Emporer Nero is gone. Jobs was married to Cupertino, Cook is from Alabama. We will see how it goes. But like every other great campus in our history, doesnt go far.

I wouldn't be surprised if the iHQ isn't built, but I don't see Apple moving from Cupertino any time soon either.

Dan8267 says

Had the "too large to fail" banks been allowed to fail, all the "too small not to fail" banks would have eaten up the assets of the too big banks at a steep discount. This would be the economic equivalent of the small, agile mammals taking over from the slow, lumbering dinosaurs after the asteroid strikes.

Yes, this would have been a good thing. It may not have been pretty in the short term, but it would have been better in the long term. Instead, entrenching the banks as even bigger than TBTF with largely the same incompetent management as before (with bigger bonuses) and without penalizing shareholders for not engaging in enough oversight isn't really solving the problem. We still need more deleveraging.

I was really suprised when all the banks got bailed out with TARP and endless bailouts, accounting rules thrown in the fire,etc all in a matter of weeks back in 08.

Remember Obama and McCain during the month before the 08 election when TARP was 'wobbling' in congress and they both stopped campaigning, flew back to washington to MAKE SURE IT PASSES? ha!

D and R is same party.

PockyClipsNow says

Remember Obama and McCain during the month before the 08 election when TARP was 'wobbling' in congress and they both stopped campaigning, flew back to washington to MAKE SURE IT PASSES? ha!
D and R is same party.

So, if the parties agree that the sun will rise tomorrow, is that further evidence that they are the same party?

corntrollio says

Yes, this would have been a good thing. It may not have been pretty in the short term

That's an understatement... lol.

corntrollio says

Instead, entrenching the banks as even bigger than TBTF with largely the same incompetent management as before (with bigger bonuses) and without penalizing shareholders for not engaging in enough oversight isn't really solving the problem. We still need more deleveraging.

I 100% agree that we need to shrink the mega banks size and bring back Glass Steagall. But that doesn't mean the choice to do some sort of bailout was wrong.

And bank shareholders were penalized, continue to be penalized, and will be for some time in the future as all of the foreclosures are worked through the system.

bubblesitter says

Troy, that graph scares the shit out of me.

What's curious is that leverage was constant in the 1990s, then blew up:

http://research.stlouisfed.org/fred2/graph/?g=3qT

it's as if households continued to borrow money to support the standard of living we were enjoying in the 1990s

tatupu70 says

I 100% agree that we need to shrink the mega banks size and bring back Glass Steagall. But that doesn't mean the choice to do some sort of bailout was wrong.

Another way to do a "bailout" was an orderly bankruptcy. People who think the only solution is to handover money with few restrictions probably aren't being imaginative enough.

tatupu70 says

And bank shareholders were penalized, continue to be penalized, and will be for some time in the future as all of the foreclosures are worked through the system.

Not nearly enough.

In reality, we don't know that much about what would have happened if more banksters were allowed to fail. A lot of transactions were off-setting and idiotic companies like AIG would have gone bankrupt (rightfully so). However, it's not clear that finance would have frozen up more than it did already during that time period. The banks were simply allowed to get bigger -- that's not a solution.

corntrollio says

In reality, we don't know that much about what would have happened if more banksters were allowed to fail

That I'll agree with. But if there was a 10% chance that the US economy literally ceases to exist, would you want to risk it? Would you swallow hard, accept that it sucks and you hate doing it, and loan the banks some money to ensure that the US economy still exists?

corntrollio says

I wouldn't be surprised if the iHQ isn't built, but I don't see Apple moving from Cupertino any time soon either.

True Apple wont disappear anytime soon or in the future, but many others have...3Com and Borland. Big names in their own way and time. Some call AMD a Texas Company. Their presence in Sunnyvale has dwindeled like so many others with majority of operations in other states.

I rather not see this happen, but homebuyers have chosen high home prices vs sustainable local jobs. You cant have both.

Bellingham Bill says

What's curious is that leverage was constant in the 1990s, then blew up:
http://research.stlouisfed.org/fred2/graph/?g=3qT
it's as if households continued to borrow money to support the standard of living we were enjoying in the 1990s

Trying to explain all these things back in mid to late 90s was a futile effort. No one listed before ~ 2005.

tatupu70 says

But if there was a 10% chance that the US economy literally ceases to exist

Drama queen much? We survived the Depression already. Our financial system is actually quite robust.

tatupu70 says

Would you swallow hard, accept that it sucks and you hate doing it, and loan the banks some money to ensure that the US economy still exists?

Strawman. You could loan the banks money with significant conditions on it and do it at a penalty interest rate to wean them off the crack. You could ring-fence and shore up only the boring aspects of banking. There were many options out there -- it doesn't take much imagination to think of better ones than we used, even if you're convinced we would have Great Depression II.

Spain is already handling this sort of thing better than we are -- management got booted and shareholders got slaughtered: http://www.elpais.com/articulo/english/Bank/recapitalization/complete/after/three/lenders/nationalized/elpepueng/20110930elpeng_4/Ten

Why would you ever let the same incompetent retards continue running the banks?

corntrollio says

Drama queen much? We survived the Depression already. Our financial system is actually quite robust

We thought it was robust, you mean. So, your logic is that if we survived the great depression then we can survive anything? How exactly did you come up with that pearl of wisdom?corntrollio says

Strawman. You could loan the banks money with significant conditions on it and do it at a penalty interest rate to wean them off the crack. You could ring-fence and shore up only the boring aspects of banking. There were many options out there -- it doesn't take much imagination to think of better ones than we used, even if you're convinced we would have Great Depression II.

How did you come to the conclusion that I thought we did the bailout perfectly?? Dan was arguing that we should have done nothing and that by doing nothing we'd be back in business after a short 2 year recession. Which I find ridiculous.

Sure we could have done it better. Hindsight is 20/20 after all. And I'd love it if we kicked all the management SOBs out. There's a slight problem with the government telling private companies who they can and cannot employ though. I wouldn't have a problem with it, but I'm pretty sure folks like Abe and Shrek might...

tatupu70 says

And I'd love it if we kicked all the management SOBs out. There's a slight problem with the government telling private companies who they can and cannot employ though. I wouldn't have a problem with it, but I'm pretty sure folks like Abe and Shrek might...

Not really. If you nationalize a bank, you can kick out the bums. Again, this happened in Spain, because they did it a better way than we did. They recapitalized the banks, but in doing so, they took over 90%+ of the bank because the bank shares were repriced to give the shareholders a huge haircut. You can then re-sell the bank to the private sector after briefly having it in receivership. We've done this before, and there is precedent for doing so. The problem is that teabagger types call this "socialism" because their analytical skills aren't that sharp, when really it's a more organized and emergency-basis bankruptcy. Regular bankruptcy takes years to resolve, and this would have been the streamlined version.

tatupu70 says

We thought it was robust, you mean. So, your logic is that if we survived the great depression then we can survive anything? How exactly did you come up with that pearl of wisdom?

Well, I don't think the current crisis was ever nearly as bad as the Great Depression, was my point. I do think our financial system is quite robust and tends to be more robust than many other countries' financial systems. There are a number of advantages to how we deal with banking business that make it that way, although this was not meant to be a treatise on that by any means. However, as one example, our financial system is robust enough to give banks plenty of liquidity, just at interest rates that might be considered a penalty, but it didn't do so. There are advantages to being the reserve currency that we have, that many other countries don't have.

tatupu70 says

How did you come to the conclusion that I thought we did the bailout perfectly??

I didn't. Where do you see that?

corntrollio says

I didn't. Where do you see that?

It just seemed to be implied from your response. I argued that some sort of bailout was necessary and you called it a strawman because they could have done the bailout more effectively.

I would have preferred to nationalize the banks as well. I think the current administration believed that it would be politically impossible, however.

corntrollio says

Well, I don't think the current crisis was ever nearly as bad as the Great Depression, was my point

I agree, but with no bailouts, it may have been as bad or worse.