Human Consequences of the Housing Bust 5 comments
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Daily life in these developments seems a bit post-cataclysmic. Children play on elaborate but empty playgrounds. They walk their dogs past rows of shiny houses that have never been lived in. Voices echo up and down the block. Unfinished houses and vacant lots strewn with construction debris clutter the horizon.
‘As far as working on my yard and saying, ‘Hey, neighbor, want a beer?’, that’s not going to happen,’ says[Robert] Waltenspiel, an account manager for Hewlett Packard [who lives in an unfinished subdivision in Auburn Hills, Mich].
Mr. Waltenspiel’s kids have no one in the subdivision to play with, so he has to take them to a nearby park for social interaction. His 4-year-old ‘will walk up to strange girls in the park and say, ‘Hey, will you be my friend?’ he says. ‘A, it’s adorable. B, it’s sad.’
The above excerpt is from “After The Bubble, Ghost Towns Across America” (subscription required), The Wall Street Journal, A1, Saturday August 2, 2008.
The Wall Street Journal ran a great piece this past weekend on the ghost towns that have sprung up across
If anybody ever doubted that politics and ideas mattered, here’s the proof:
- There are lost of ghost towns containing people stranded from human contact who are susceptible to criminals springing up all over the country.
- Construction workers, realtors, mortgage brokers and loan officers are losing their jobs.
- Real estate speculators are going bankrupt.
- Many new homes are standing empty because they were built without considering the real demand.
These are all the consequences of the United States Federal Reserve and its disastrous easy money policies. The great Austrian economist Ludwig von Mises laid it all bare almost a century ago in his The Theory of Money and Credit (1912).
On this blog and Wall Street, we’re focused on the economic costs: the bank failures, the writedowns, the lost jobs, the collapsing value of single-family homes, etc. However, there’s also a human cost. People made decisions during the boom, to switch jobs into a real estate related career, to buy a new home, to take out a risky mortgage, that are now taking a toll on their lives. Johny Cutter, and thousands like him, lost his down payment and his home. People are losing their jobs, their equity in their homes, and they’re scared because they don’t know when it will end or understand why it’s all happening.
Believe it or not, it doesn’t have to be this way. The boom and bust cycle is entirely a function of the easy money policies of our central bank. For most of human history, the precious metals served as money precisely because their supply in nature was limited and their inherent scarcity and value made them suitable as mediums of exchange. A central bank couldn’t just print paper and use it as money. People actually had to find metal deposits and mine them. But in the modern world, it’s a paper money system. This is a fascinating intellectual and political history.
It doesn’t have to be this way, though, and it shouldn’t be this way. However, what can we do? A few of us know better, understand how it really works. However, we have no power. The people in power benefit from having control of the money, even if the human and economic costs to the average man are disastrous:
[Life] is a tale told by an idiot, full of sound and fury, signifying nothing.
- Shakespeare, Macbeth, Act V, Scene V.
What a spectacle. It’s happened before. And it will continue to happen - again and again and again. As George Santayana said:
Those who do not understand history are doomed to repeat it.
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This article has 5 comments:
Actually, all the job growth from 2001 to 2006 were in these areas. With the exception of construction workers - many of whom are hardworking, undocumented workers - their impact on the economy was negligble as they acted as mere middlemen. In many cases, mortgage brokers contributed to the breakdown by steering risky borrowers to underwriters and even forging and fabricating documents creating income and assets for borrowers who did not exist. No one likes to see someone lose their job but for a realtor who earned a 6 percent commission by sitting in an empty house on a weekend and then repeatedly calling the real estate attorney and asking "when is this deal going to close" - their contribution to society is debateable. Yes, there is a contraction to GDP from the loss of these "jobs" as mortgage brokers cannot afford the lease payments of their Mercedes. But that is a discussion as to whether GDP is relevant to the social, economic and moral health of the nation.
On the street, all of these salesmen are now peddling "loan modifications" continuing the co-dependent fiction that Americans can continue to live beyond their needs.
Developers undertook risky projects to earn high returns. They have Chapter 11 to hide behind. The salesmen will slip into the insurance industry to peddle annuities for "guaranteed returns in these tough economic times" that they helped create.
Once the ghost towns are bulldozed, and the folly is forgotten, the cycle will start again, boom and bust, until our foreign masters herd us onto reservations towards our gradual extinction. Hey, they're handing out free blankets! (sneezing)
Think "the great depression" but without the same relatively high rate of morals and religion. I expect the divorce, domestic violence, murder, and general crime rate to skyrocket.