[Our government at all levels has come to care too much about our land values and not enough about our right to own it.]
I'm not an economist but I've been well educated in the subject. I even taught an advanced course to high school students. Ah but I do like to embellish. Let's be strait with each other. I'm not an economist but I'm going to offer my best advice on the subject anyway, which will be a lot better than whatever seems to be currently flying around in the White House.
We keep hearing talking heads tell us that either the economy is finally in recovery or that it has a few more rough spots to still get over. Most of the experts we are told, and expected to blindly believe, are supposedly saying we are in recovery. Their strongest argument being the recovery of stock values since the crash.
Now it is there that my education in the subject of economics jumps up and starts flashing an alarm at me. Crashes happen because of an excess of a range of business ventures that are at best weak and at worst foolish. In the case of our last crash the lion's share of those less than good ventures were primarily in the area of real-estate due to home loans being too easy to obtain and other consequences of attempted government tweaks. Knowing this, I don't think the current levels of the stock market are a good indicator of a real recovery.
What made this last crash so bad is that the bad business ventures were the product of more than just bad business plans. They were the product of bad government plans, plans that government on all levels across the United States eagerly participated in. They were varied only by context but they all shared the same general theme.
"What's good for builders and real-estate values is good for communities in general." Construction meant jobs and that along with higher real-estate values meant higher government revenues through income and property taxes. Thus governments on all levels did whatever they could to encourage construction and growth. Things like forcing insurance companies to charge less then they needed to in order to insure homes built in dangerous places like near beaches or on fragile cliff-sides. They also took care to tailor taxes to help things along as well. On the federal level we still have the home mortgage interest deduction and on state levels we have things like Florida legislators trying to weaken homestead exemptions designed to keep people on fixed incomes from being driven out of their homes by rising property taxes. They want to weaken this protection because it's forcing new home buyers to pay higher property taxes in order to make up for the protected ones, and you guessed it, this makes it more difficult for folks to build new houses and sell them.
The worst government culprit in all of this has been the federal government with the unintended consequences of the Community Reinvestment Act that attempted to assist poor minorities in getting home loans. This ultimately led to the Federally backed weak mortgages that were the primary weight pulling the world down in the last crash.
Even burdensome government spending owes a great deal to this bad government theme, for much of state and local spending around the country has been driven by the desire to improve real-estate values by improving local amenities like parks, public transportation, public theaters, and local access to colleges. In deed it could be said that the song "This Land Is Your Land" should be the theme song of what's primarily wrong in the United States today. Our government at all levels has come to care too much about our land values and not enough about our right to own it.
Now where does that bring me on the question of when it can be safely said we're in recovery? Well, solid recoveries only happen when money and time start to get heavily invested in solid business ventures. That means the weak ones whose excess accumulation caused the crash in the first place need to be out of the picture for the most part. So where is the money in the stock market going? Is it to solid business ventures like for example, stuff closely related to the oil fields of North America? That's where a certified economic analyst would come in handy, but just looking at the values of shares in companies like Marathon and Exxon I'm not seeing a clear trend. I can't say one way or the other there but on the question of whether the bad ventures are mostly out of the picture, that is so clear it doesn't even take my level of training to see it. Real-estate and new construction are still a major part of the investment picture. That means that of the newly moving funds, too much of it is chasing weak and possibly even foolish investments.
And governments especially don't seem to have learned their lessons. They're continuing to try and boost real-estate values and encourage new construction. Investors need to wise up for a few years and stay as far away from new home construction and real-estate flipping schemes as possible. They also should develop a general aversion to any potential investment that depends on special favors from governments. It's not that governments aren't necessarily reliable, it's that whenever a government attempts to manage markets there will always be a piper to pay, and that the piper from the story ultimately ends up taking his payment in children is soberingly appropriate.
So when I stop hearing about "good signs" in real-estate and new home construction and I start hearing about money going to solid business ventures, then I will say we are finally on our way out of the great recession. Until then, no.
I'm not an economist but I've been well educated in the subject. I even taught an advanced course to high school students. Ah but I do like to embellish. Let's be strait with each other. I'm not an economist but I'm going to offer my best advice on the subject anyway, which will be a lot better than whatever seems to be currently flying around in the White House.
We keep hearing talking heads tell us that either the economy is finally in recovery or that it has a few more rough spots to still get over. Most of the experts we are told, and expected to blindly believe, are supposedly saying we are in recovery. Their strongest argument being the recovery of stock values since the crash.
Now it is there that my education in the subject of economics jumps up and starts flashing an alarm at me. Crashes happen because of an excess of a range of business ventures that are at best weak and at worst foolish. In the case of our last crash the lion's share of those less than good ventures were primarily in the area of real-estate due to home loans being too easy to obtain and other consequences of attempted government tweaks. Knowing this, I don't think the current levels of the stock market are a good indicator of a real recovery.
What made this last crash so bad is that the bad business ventures were the product of more than just bad business plans. They were the product of bad government plans, plans that government on all levels across the United States eagerly participated in. They were varied only by context but they all shared the same general theme.
"What's good for builders and real-estate values is good for communities in general." Construction meant jobs and that along with higher real-estate values meant higher government revenues through income and property taxes. Thus governments on all levels did whatever they could to encourage construction and growth. Things like forcing insurance companies to charge less then they needed to in order to insure homes built in dangerous places like near beaches or on fragile cliff-sides. They also took care to tailor taxes to help things along as well. On the federal level we still have the home mortgage interest deduction and on state levels we have things like Florida legislators trying to weaken homestead exemptions designed to keep people on fixed incomes from being driven out of their homes by rising property taxes. They want to weaken this protection because it's forcing new home buyers to pay higher property taxes in order to make up for the protected ones, and you guessed it, this makes it more difficult for folks to build new houses and sell them.
The worst government culprit in all of this has been the federal government with the unintended consequences of the Community Reinvestment Act that attempted to assist poor minorities in getting home loans. This ultimately led to the Federally backed weak mortgages that were the primary weight pulling the world down in the last crash.
Even burdensome government spending owes a great deal to this bad government theme, for much of state and local spending around the country has been driven by the desire to improve real-estate values by improving local amenities like parks, public transportation, public theaters, and local access to colleges. In deed it could be said that the song "This Land Is Your Land" should be the theme song of what's primarily wrong in the United States today. Our government at all levels has come to care too much about our land values and not enough about our right to own it.
Now where does that bring me on the question of when it can be safely said we're in recovery? Well, solid recoveries only happen when money and time start to get heavily invested in solid business ventures. That means the weak ones whose excess accumulation caused the crash in the first place need to be out of the picture for the most part. So where is the money in the stock market going? Is it to solid business ventures like for example, stuff closely related to the oil fields of North America? That's where a certified economic analyst would come in handy, but just looking at the values of shares in companies like Marathon and Exxon I'm not seeing a clear trend. I can't say one way or the other there but on the question of whether the bad ventures are mostly out of the picture, that is so clear it doesn't even take my level of training to see it. Real-estate and new construction are still a major part of the investment picture. That means that of the newly moving funds, too much of it is chasing weak and possibly even foolish investments.
And governments especially don't seem to have learned their lessons. They're continuing to try and boost real-estate values and encourage new construction. Investors need to wise up for a few years and stay as far away from new home construction and real-estate flipping schemes as possible. They also should develop a general aversion to any potential investment that depends on special favors from governments. It's not that governments aren't necessarily reliable, it's that whenever a government attempts to manage markets there will always be a piper to pay, and that the piper from the story ultimately ends up taking his payment in children is soberingly appropriate.
So when I stop hearing about "good signs" in real-estate and new home construction and I start hearing about money going to solid business ventures, then I will say we are finally on our way out of the great recession. Until then, no.
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