Has the Bubble Finally Burst?

setancre:

A very persuasive argument. Thanks for sharing.

Posted by: Polemicist at October 1, 2008 12:45 PM

11217:

Unfortunately, your sentiment doesn't have much to do with real estate or even human behavior in general.

It's a nice sentiment, don't get me wrong. I'm all about free ice cream, endless sunshine, a chicken in every pot, and a puppy on every lap. But I'm also a realist. New York City is not Buenos Aires. When food shortages become a reality and rolling blackouts not uncommon, you can expect serious civil unrest unknown there. It is likely before that happens, consumer goods and the luxuries of life will become out of reach for all but the well off. Without distractions, we will have some problems.

We really are at the precipice of a serious economic collapse, and I'm not confident we have the necessary civic virtue to overcome such an event, if it were to occur.

There is a sense of entitlement and exclusion that permeates our society that limits cooperation and breeds resentment. I try to highlight it with the NIMBY phenomenon, but also with the level of acceptance of identity politics and the balkanization of our neighborhoods. When the government ceases to have the ability to effectively deal with the coming crisis, the various insular groups of this city will become intolerant of outsiders.

Only the Soviet Union provides us with an acceptable modern analogy, given our similar economic situation, military encumbrances, and centralized control. There is a fabulous book on the subject that came out recently, I encourage everyone to read it:

http://www.amazon.com/Reinventing-Collapse-Example-American-Prospects/dp/0865716064/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1222881138&sr=8-1

Posted by: Polemicist at October 1, 2008 1:15 PM

Also, I don't know if everyone caught Robert Shiller's take on this mess from this past Sunday

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092602838.html?hpid=opinionsbox1

Also a good read, and quite relevant in light of all the Case-Shiller index talk.

Posted by: Polemicist at October 1, 2008 1:21 PM

gkw:

Yes, I have spent time in Latin America. Most people are familiar with hardship on some level. They aren't going to riot because stores don't have bread for a day or two. They are used to public utilities not being available at all times as a general rule. They also have no problems with the police carrying submachine guns and using them to maintain order.

My point is merely that life has rarely been easy for people in Argentina. The tolerance for pain in this country and this city in particular is shocking low. Why do you think I loved making fun of those nutjobs in Carroll Gardens? The rest of the world laughs at us when people complain about buildings being 10 feet too tall. There are far more pressing problems in this world.

The primary issue everyone must realize is the current crisis ultimately is due to the onset of peak worldwide oil production. Unlimited credit expansion is predicated on continued economic production. Unfortunately, such production requires energy, which today means oil. Credit, by necessity, cannot continue to expand indefinitely until an alternative is found or we completely reorder society. There is no time to do either, thus at some point - credit expansion will stop and asset deflation will set in.

Part of the reason I so fervently support higher density development is there a chance, a slim one, that the urban nature of this city will make it the center of a new economic order in the future. We are the only place in this country that has 3rd world level energy usage, and it is the high density development and public transportation network that makes it possible.

There is no question energy distribution will falter when we no longer can borrow from foreign governments to buy oil. Food shortages will be a reality sooner than you think. Industrial agriculture has destroyed much of our farmland. Current farming techniques are dependent upon imported minerals like phosphorous and natural gas for fertilizer. The price of both of these necessities has tripled or worse just this year alone. We should have learned from the Soviets: collectivized farms don't work.

Posted by: Polemicist at October 1, 2008 3:17 PM

Sam: Do you even know who Che Guevara is? I directly criticized communism in my post, why would I support a homicidal communist lunatic?

fsrq:

Actually, by that point - no one will take US dollars to buy oil because they will have no value. They have oil. What do we have? Hollywood?

11233:

What is certain is value of real estate relative to other necessities like food and energy will likely return to historical norms. Current prices are fundamentally unsustainable for the reasons I mentioned - they are based on the flawed assumption credit and the productive economy can continue to grow ad infinitum, which it can't. We can't predict the nominal dollar amount due to manipulation of the currency, but we can say with certainty that fewer loaves of bread will buy a condo in the future than today.

Arsenal:

we live in serious times

Read the Hirsch Report. Anyone who read this when it came out in 2005 should have known the boom couldn't last.

http://www.acus.org/docs/051007-Hirsch_World_Oil_Production.pdf

Posted by: Polemicist at October 1, 2008 3:50 PM

gkw

I gave you a nice link for a great book on this subject already. The Hirsch Report is generally considered one of the more authoritative papers on the subject. Many other books have been written.

Besides, the WSJ has little interest in report a truth, not a theory, that will have sudden, revolutionary implications for the future of mankind. Such revelations do little to inspire confidence in the Wall Street Casino.

Posted by: Polemicist at October 1, 2008 3:57 PM

fsrq:

I'm sure the folks in the Supreme Soviet were saying the same thing in 1985 as the Afghan War was grinding down the will of the people.

I do hope you're right. Thanks for spending the time compiling those statistics.

Posted by: Polemicist at October 1, 2008 5:32 PM