patrick.net

If anything, it makes me want to make sure that when the bust comes we keep these jerks pent up and responsible for their reckless actions, no mercy.

I couldn't agree more. There should be no free ride for irresponsible spending. I'm hoping the new bankruptcy laws keep more people accountable for their stupidity.

Thanks, Sacto! There's is quite possibly nothing we haven't discussed yet, but still. :-P Here are some thoughts on negatives, plus a few positives:

Negatives I've observed:
1. the more people have, the more they want.
2. Marriages strained due to long work hours and struggles to afford BA cost of living
3. kids who have very little time with their parents
4. people with more of a grasping, greedy mentality than I've ever seen before
5. Extended families being more spread apart because of inability to afford living in the same places...so, kids growing up with no grandparents around
6. Older people trapped in houses bigger than they need, or in declining neighborhoods, because they can't afford to move with current prices and the tax situation

Positives:
1. more immigrants spreading out to affordable middle America, creating more diversity there and giving them a better chance to realize the American dream (I hope)

I'm trying to think of some other positives (and negatives), but I've gotta go for now. Later.

There have been plenty of social effects attributable to the RE bubble in the BA and other bubble-markets. I assert that these effects range from terrible, socially disruptive to benign to positive. As with most economic forces, there are winners, losers, and structural change.

For me, the worst losers in the BA have been those caught in the increasingly fragmented sections of the socio-economic strata. Put simply, as nominal prices have increased rapidly in low-wealth areas (price increases as a percentage risen fastest in poorer communities), people with the least means have been permantly cut off from an important source of personal wealth generation within the US economy. Although we tend to focus on the educated class (formerly known as the middle class) and their problems buying into RE, most in this strata will nonetheless be successful in generating personal/family wealth over their lifetimes. It is the working class that are now all but completely cut off from any hope of generating wealth in excess of income.

And I don't think a correction will help. Unfortantely, it will be the poor who take the brunt of the restructuring that will occur post bubble, as many of the higher paying jobs available to them evaporate. They simply won't be in any position to exploit lower RE prices given lower expected incomes and higher cost of debt.

The biggest positive effect of the RE bubble has been the degree to which real wealth has been created. A significant portion of GDP growth post 2000 has been derived from US consumer spending and RE growth. Although RE deflation will halt this, and asset values will decrease, it won't erase the real gains in capital stock that have accumulated within the economy. So long as we don't enter a period of prolonged recession, stagflation, or worse, then this will turn out to have been a lasting positive effect of the rapid RE appreciation.

But, back to my main worry. I really fear that major political, legal, economic restructuring will be necessary within the next couple decades to deal with the growing population segment that will in effect become permanent rentors. We will likely see many areas push through more forms of rent control, rentor protections, etc.--perhaps more akin to mainland Europe. I won't argue the merits of that system, but it will be a major cultural and structural shift for the US system of "perceived social mobility".

(just my opinion, it's worth what you paid)

Well, this one, from my extreme perspective, is too easy.

It's not really the housing bubble.

It's America. It's diseased, and it has been for a long time.

The housing bubble is merely a bed sore on America's rotting ass.

The "social" affect will be simple. Write this down moderates, so you'll remember me later . . .

This country is going to collapse. Not recede. Not recess. Collapse. That we create a void. What will fill the void is the only question.

Among the obvious options . . . Hillary and her communist friends. Very conservative religious folk.

And let me throw this out there to Jamie . . .

as for "diversity spreading to middle America", what do you mean by "diversity"?

Diversity of skin color?
Diversity of culture?

Because I gotta point out, the first is silly, and the second is probably unwanted if that culutre resembles the immigrant culutre in Cali, which is significantly mexican.

Diversity for the sake of diversity is one of the great leftist con jobs of the last 30 years.

MIT, for example, has 20% "underrepresented" minorities. Boy, if it wasn't for them damn asians, they wouldn't be obliged to use the word "underrepreseted". In any case, this diversity for diversity's sake is destructive.

In the ideal society, there would be no diversity; everybody would be a good person looking to care for ems neighbor.

And I don’t think a correction will help. Unfortantely, it will be the poor who take the brunt of the restructuring that will occur post bubble, as many of the higher paying jobs available to them evaporate. They simply won’t be in any position to exploit lower RE prices given lower expected incomes and higher cost of debt.

I agree.

Furthermore, this zero-sum game (sorry) is about taking from the poor and giving to the rich. No evil force at work here. Just a natural tendency. There is nothing particularly wrong about it. Just make sure we position ourselves and play accordingly.

"There is nothing particularly wrong about it"

I can't agree. When they're, in the aggregate, less intelligent, less educated, and biologically less able to compete with you and me, is it, in the end, ok to take their money?

Diversity for the sake of diversity is one of the great leftist con jobs of the last 30 years.

Well said. True diveristy comes naturally. Diversity for the sake of diversity is just a trick to get votes.

The “social” affect will be simple. Write this down moderates, so you’ll remember me later . . .

This country is going to collapse. Not recede. Not recess. Collapse. That we create a void. What will fill the void is the only question.

I'm sorry, I'm driven by logical arguments, data, and facts. If you assert that the country will collapse then state your hypothesis so we can test it. Otherwise, it's so much hot air.

As to diversity: the perception of social mobility has been a driving economic force in this country since the early Industrial Revolution (ala Horatio Alger). This implied diversity because the new stock of workers were immigrants, first form Europe, later from Asia and the Americas. Although I'll agree that social-engineering of diversity doesn't work, the claim made here was that economically-driven diversity is a good thing. I challenge you to logically deny this fact...and if you can, go submit yourself for a Nobel prize in Economics. "Leftist con jobs" lol. The industrialist Oligarchs who imported millions of workers from Asia were leftists as much as I'm short-winded.

I can’t agree. When they’re, in the aggregate, less intelligent, less educated, and biologically less able to compete with you and me, is it, in the end, ok to take their money?

It is an amoral act. Hey, I thought you are a libertarian. ;)

I do not agree that poor people are necessarily less intelligent as a group. However, they are not well aligned with the game. It is not really their fault. They just have a different philosophy about life that may turn out to be ... right.

Remember Condoflip.com (and all those RE get-rich-quick seminars that have sprouted like fungus everywhere)? Now meet "GotExit?": www.gotexit.net

"The GotExit? real estate exit strategy seminar series is designed to help people just like you design unique and appropriate exit strategies for their appreciated investment real estate.

We also offer additional “exit strategy” seminars and consulting on other important personal and business transition events including business succession, family legacy planning, and general asset protection techniques."

Escaped,

I get your point about the "diversity" trap and the idiocy of government-mandated PC-ness, lack of border enforcement, etc,, but aren't you overreaching just a tad by blaming it all on the lefties? (Personal disclaimer: independent who's as likely to vote Republican as Democrat.) As Randy H pointed out, the far-right/pro-business-at-any-social-cost crowd is almost as rabidly pro illegal immigration as the far Left. Great way to bust unions and lower wages, which is usually the single largest cost of business.

RandyH "the perception of social mobility has been a driving economic force in this country since the early Industrial Revolution"

This sounds like a sociologist, which are about a half rung up on the science ladder from astrologists.

If what you mean here is . . . "people won't work hard to get wealthier if they don't believe the system allows them to get wealthier," then I agree, and I also agree that water is wet.

"If you assert that the country will collapse then state your hypothesis so we can test it."

Premises- People are, with very few exceptions, stupid animals who behave in extremely self-destructive ways. Given multiple options of governement in a democratic system, stupid animal people will always tend toward voting for a more socialist system. Given economic severity, this propensity will worsen. Progression toward socialism is equivalent to distance from economic prosperity. We are currently in a condition of worsening economics.

Hypothesis - This society is unsustainable and will crash.

"economically-driven diversity is a good thing. I challenge you to logically deny this fact"

How can a person logically deny a fact? To deny a fact is, quite obviously, Bones.

How about this. I'll refute your argument? Let's start with this . . .
I have no idea what you mean by "economically-driven diverstiy". If you clarify what that turn of words means, I'll do my best to answer your challenge.

It’s America. It’s diseased, and it has been for a long time.
The housing bubble is merely a bed sore on America’s rotting ass.

This country is going to collapse. Not recede. Not recess. Collapse. That we create a void. What will fill the void is the only question.

Wow, Escaped, you make me feel like a RE Bull by comparison! ;-)
Seriously, this country has a lot of problems, but I don't think they're all unsurmountable. Our major problems today are mostly or completely within our control as a nation to do something about, if we choose to: national debt/overspending, zero savings rate, credit-fueled RE Bubble, obesity epidemic, extremely inefficient sick-care system, etc...

I never thought I'd ever say this here, but lighten up, ok? If the WWII generation managed through a great depression & world war, we should do fine --IF we get our priorities sorted out (a big "if" I agree).

Harm, I'm sorry if what I wrote seemed to imply that I blame the leftists 100% for the state of America. I don't.

I think that there have been many things that have contributed to the fall of this country. Among them, and of critical importance in my view, are . . .

Decline of basic morality/decency/respect for family.
Slide of government toward socialism.
The Fed.

Those who are "on the right" can't claim the highground. In fact, often, they must admit that they treated people like crap for their own gain.

I am a libertarian, and between the two evils - the right's mistreatment of those who are different, and the left's relentless pull toward the economic cliff, I have a hard time deciding which is worse. From a moral perspective, it's certainly the right. From a practical perspective. It's the left.

"I never thought I’d ever say this here, but lighten up, ok?"

If you'd prefer me not to post, I'd be happy not to. If you don't care or if you want me to post, then I'll do so unlightened up.

But when you say to someone "lighten up," where I come from, that's a euphemistic phrase for something much harsher. If that's what you meant, then just say it - it's fine. Believe me, I think I'm past my feelings being hurt.

Furthermore, this zero-sum game (sorry)

Whenever you're game (sorry, couldn't resist the pun), let's have the whole debate.

How about this. I’ll refute your argument? Let’s start with this . . .
I have no idea what you mean by “economically-driven diverstiy”.

I have to admit, this is first time I've been acused of being a sociologist. I can't stop laughing. I mean labor-mobility, which is well studied and you can find many references in economic theory. Labor mobility creates more efficient uses of existing capital stock, among other things. Within the US, fluid labor mobility coupled with real and perceived socioeconomic mobility has resulted in historically very high productivity, which of course makes capital stock valuable.

I can find no examples of "diversity-limiting" societies except for those of very small populations and/or geographically isolated , which have been able to sustain long-term economic growth (in the modern era). By diversity limiting I mean engineered restrictions, be they economic, political, cultural-norms-driven, education, etc., which serve to systematically exclude the inclusion of new workers into the society.

But when you say to someone “lighten up,” where I come from, that’s a euphemistic phrase for something much harsher.

Wasn't trying to be harsh --sorry if it came across otherwise. I just meant it to be taken at face value. I agree there are a lot of big systemic problems with our society and economy right now, including balooning entitlement programs and an equally ballooning sense of entitlement people seem to have about government providing/fixing everything. Call it a lack of personal responsibility, creeping socialism, whatever --we don't disagree on this. I was just trying to say it's a pretty large leap to go from where we are today to total collapse.

I can find no examples of “diversity-limiting” societies except for those of very small populations and/or geographically isolated , which have been able to sustain long-term economic growth (in the modern era).

How about Japan and Swissland? Are they not "diversity-limiting" enough? Don't they have relatively "long-term economic growth"? Am I missing something?

Whenever you’re game (sorry, couldn’t resist the pun), let’s have the whole debate.

Sure. I am not "game" today though. :)

HARM = "If the WWII generation managed through a great depression & world war, we should do fine –IF we get our priorities sorted out (a big “if” I agree)."

The dark ages lasted 500 years. HARM, I wish I could share your optimism.

I don't.

We have been blessed and cursed to live at the height of human achievement. In our lifetimes, we have extended into space and into our own genetic material. We complain about the state of medicine? 70 years ago kids got bacterial infections and died. Bing. Our medicine, although an inefficient sytem, is wonderous compared to everything that came before. Here in America it is better than most places, and certainly better than anything anywhere before 15 years ago. We grew up here with little threat of war, and with most of our conflicts being created by evil within our own government. We, and by we I mean anybody 30-70, have lived throught the peak of the oil age, where energy was as cheap as it ever was and as it will be until a new source is discovered. We have lived floating in the largess of this oil. We eat cheaply. We work easily. Our health, should we choose it, has never been better. Never, ever has it been this good, and until that next energy source comes alon -assuming we havn't destroyed our home in the meantime - it will not be this good again.

In short, as far as the historical human condition goes. We had it all.

That is going to change. It's going to change dramatically. It's going to change quickly. And your grandchildren will look you in the eye with wonder in 40 years when you tell them about it.

Prepare, or don't. For those of you who view me as a silly, irrational, gloom and doom guy, at least look over your shoulder and acknowledge that, to the person behind you, you are me to em. You see? You are me, and I am you.

So while you look at the person behind you and think, "Fool, had you only the sense to listen to me and not buy that house," you simultaneously look at me and think, "Fool, to be so concerned."

Like Carlin, eh? Those driving faster are lunatics, and those slower idiots.

You have my warning. Do with it what you will. I urge you all to prepare so that you can take care of youselves, and then, to the extent you can, your neighbor.

Without that there is nothing.

We have been blessed and cursed to live at the height of human achievement.

Very well said. The world has much doom and gloom in itself. But I cheer myself up seeing the world as a black comedy, like Dr. Strangelove.

...have lived throught the peak of the oil age...

But soon, we will live through the age of peak oil.

Premises- People are, with very few exceptions, stupid animals who behave in extremely self-destructive ways. Given multiple options of governement in a democratic system, stupid animal people will always tend toward voting for a more socialist system. Given economic severity, this propensity will worsen. Progression toward socialism is equivalent to distance from economic prosperity. We are currently in a condition of worsening economics.

Premise 1: People are stupid.
--I'll accept this even though it is difficult to test and quantify. But it sounds folksy.

Premise 2: Stupid animal people like socialism.
--There are as many examples of societies trending towards facist or despotism systems as socialist systems, in fact more if you count the 19th century from the onset of the modern industrial era. So I can agree that Democracy/Republic is not the default state of affairs, but not that socialism is the innevitable outcome.

Premise 3: Economic serverity worsens 2. This is a true statement.

Premise 4: Progression towards socialism is proportional to economic relativity. This is false because 2 is incorrect. This is a causual assertation which requires rigid testing and proof in its own right. Further, it implies that such trends are linear and unidirection, which is not supported historically. Case-in-point, the US between 1929 and 1989. This period exhibited wide swings in relative economic prosperity as well as shifts towards and away from socialistic mechanisms.

Premise 5: We are currently in a weakening economy. If you are making a populist statement based on non-economic measures, then perhaps. But I can't quantify or test that. Economically-speaking, the economy has not worsened as a whole, it has strengthened. Not that I don't think there are serious structural problems, but the statement that the US economy is weakening must be qualified by what structural problems you think there are, and whether these problems are irreversable, fixable, or perhaps simply transient adjustements.

The Fall of Democracy

--------------------------------------------------------------------------------

When the thirteen colonies were still a part of England, Professor Alexander Tyler wrote about the fall of the Athenian republic over two thousand years previous to that time:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.

The average age of the world's great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.

Alexander Tyler

So I don’t know about the bondage part, unless metophorically speaking we are in bondage to our Chinese creditors.

That's sort of what I was thinking. Maybe an economic bondage of sorts. Socialism perhaps?

How about Japan and Swissland? Are they not “diversity-limiting” enough? Don’t they have relatively “long-term economic growth”? Am I missing something?

die Schweiz fails both tests. It is both geographically isolated and has a small population. Japan is more interesting, but has a history too short to reveal whether the growth is indeed sustainable. Remember, we can only measure Japanese economic output in any comparative way from about 1950 forward. And this period is hardly a testament to sustained economic growth, given the past 20 years of that horizon.

One of the structural doom-and-gloom problems often pointed to in the US is often swelling entitlements exagerrated by aging population. Of course, this is far worse in most of Europe, and in Japan it's outright terrifying. At least most of the EU allows either some immigration or guest-workers. Japan has a real problem, and Japanese culture as we know it today will likely undergo a dramatic upheaval. You think "family values" and "community" are at risk here? Be thankful you're not a traditionalist in Japan.

Socialism is like the kid in the Matrix. First you have to realize there is no carrot……Then and only then will socialism work.

Ah, buy how many do you think will "get it?" Do you think we're headed for another type of government or that we'll keep floundering around trying to keep our democracy afloat?

The average age of the world’s great civilizations has been two hundred years.

A Civilization != A Nation State

The modern nation state hasn't been around all that terribly long. I propose that perhaps we are instead undergoing a shift into the next era of civilization organizational structure. There are new dymanics at play today which never existed in previous eras, the most important (perhaps) being globally distributed instantaneous communication.

It may be that the US is simply becoming obsolete more than we're all going to hell in a handbasket because of the evil [insert your personal bias here]'s.

You think “family values” and “community” are at risk here? Be thankful you’re not a traditionalist in Japan.

I totally understand that. Let's hope that the new people do not screw up the sushi.

SactoQT, actually I think were headed for another world war. This time we get to beat back facism in the form of fundamentalism. I predict a major recession/depression followed by war with the arabs/muslims, and I predict the chinese will side with the arabs/muslims. Starts like this, china invades or threatens Taiwan, or goes for the Spratleys and Japan objects.

Scary scenario. I think things could escalate, but I hope it doesn't come to this.

SactoQT, actually I think were headed for another world war. This time we get to beat back facism in the form of fundamentalism. I predict a major recession/depression followed by war with the arabs/muslims, and I predict the chinese will side with the arabs/muslims. Starts like this, china invades or threatens Taiwan, or goes for the Spratleys and Japan objects.

I am still counting on nuclear weapons to maintain the balance. But if the fundamentalists can obtain nukes, all bets are off.

IMO there is a slight risk of war in the Taiwan Straits around the 2008 Olympics timeframe.

I spent 3 years in japan, most of the sushi there really isn’t that good. The good stuff will set you back an arm and a leg. Sashimi is good all over though. Want good sushi, go to Angelfish in Alameda. Amazing.

They (in Japan) don't de-vein the shrimp, who wants gritty shrimp? I'm surprised you still would crave sushi after 3 years in Japan. I spent less than a year there and I've had enough to last a lifetime.

were headed for another world war

I wish I could object to this more strongly. But you could well be correct because the outcome is in the hands of politicians, and we have a serious vacuum of true leadership. All we can do is hope leaders arise, and fairly quickly. If there is a world war, then all our debates here are moot. Any war on such a scale today would be either (a) the end, period, or (b) so totally devestating that we'd reset the clock to about the year 1200 with a Mad Max twist. The problem is that nations don't like to lose wars, and there are quite a few nations that have trump cards they can use if they start to lose...and once one does, they all pretty much have to respond in kind.

An earlier statement said that "we grew up free of risk of war". This isn't true. We (most of us I assume) grew up during a period of extreme likelihood of nuclear-war, which nearly occurred on at least 3 occassions. In fact, tying this argument back to the original exchange between me and Peter P, the reason we have modern game-theory today is as an attempt to explain why the USSR and USA never pushed their buttons.

Plus the Japanese love to drink

Do they ever! I went to school in Osaka and my friends and I would bar hop on the weekends. Total blast. Love the theme bars in Osaka-- Bar Nowhere Jamaica-- stuff like that.

IMO there is a slight risk of war in the Taiwan Straits around the 2008 Olympics timeframe.

At least the ensuing war would solve our current account deficit problem as all the greenbacks in the Chinese Central Bank are suddenly "eliminated".

We (most of us I assume) grew up during a period of extreme likelihood of nuclear-war, which nearly occurred on at least 3 occassions.

Can you refresh my memory?

In fact, tying this argument back to the original exchange between me and Peter P, the reason we have modern game-theory today is as an attempt to explain why the USSR and USA never pushed their buttons.

Fundamentalists have a very different value system. This severely limits the use of modern game theory.

I feel that the US is so morally bankrupt, that given the right amount of green paper, people here would assist in bring a stray nuke here. When it gets lit off, and it will, watch the fuck out.

Scary scary but true. There are enough people out there who hate us enough to set one off, all it takes is getting their hands on one.

I feel that the US is so morally bankrupt, that given the right amount of green paper, people here would assist in bring a stray nuke here. When it gets lit off, and it will, watch the fuck out.

There are always people willing to sell out, in every country. This is a huge problem in Russia right now, as lots of these people who'd sell nukes are nuke-tech aren't terrible people, just well educated, poor, and desperate. But I agree, the first nuke that lights off changes everything, permanently. It will be the milestone that marks entry to the next era...and that's if we're lucky.

SactoQt,
Excellent quote! Should be taught in schools.

Thanks. I think there is a lot to be learned by looking at history. Problem is that a lot of people think "this time is different" but you know the saying, "The more things change the more they stay the same."

Randy H, I respect that you are intelligent and well educated. However, your desire to "rigidly" test everything will, in my opinion, waste time, money, and will end up impotent.

I stand, my back to the setting sun a breeze in my face. and note the wind blows lightly to the west. You fumble with your compass and portable weathervane trying to prove that the wind blows east.

What I learned a long time ago is that, regardless of the data, there is always an argument the other way.

I am sure you are quite excellent at compiling data and arguing what it portends. It's a useful skill in many contexts.

I won't argue on those grounds, because they are irresolute and can be molded to any conclusion.

You will have your opinion, and I will have mine.

I suppose where we may differ is in your belief that things are economically provable or not.

I believe not, which is why I have never played the stock market much, and why I never get a good answer out of an economist or investment advisor when I ask, "so why do I have so much more money than you if you know so much about the economy?"

So please save all of your economic theories - they have done virtually no good for America, and I think they are currently useless at best, damaging, at worst. We are in a liquid situation, and you will not be able to apply your mathamatical models to such complex systems.

I view our fate not through the extroardinarly weak power of the macroeconomic lens, but rather through my own eyes. I have read much of the same information as you. Your theories tell you . . .

"Economically-speaking, the economy has not worsened as a whole, it has strengthened."

My understanding of people, in combination with the horrific data in front of us, tells me that your sentiment is exactly wrong.

I claim to be able to predict the behavior of people extremely well - they have rarely disappointed me, which is to say that they have almost always disappointed me.

So I have enjoyed the company of this board. You all seem like decent people. You all certainly are smart people.

When you first get the notion that I may be right, some of you might be able to find me. Send me an email.

Maybe.
Maybe we can help fill that void.

I think I know how.

I think we can do it.

Goodbye folks, be good to your neighbors, regardless of how little they will deserve your goodness.