The “new” bubble can’t be inflated very much before it’s going to blow again.
By Daniel at 31 January, 2010, 11:26 pm
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
At bottom, the real problem, aside from the current failure to clear debt issue, is the model of a “housing economy” anchoring the financial system. The simple fact is that the US, Canada, Australia, parts of Europe and other places so overbuilt not just the number, but the size of homes assuming these would be perpetually valued the way they were over the last several decades.
But that reality has changed, and will change even more - retirees simply don’t need that space, but nor do 2 people with on average 2 kids or less, taken with a decreasing ability to afford/maintain them (the houses by themselves - and though the kids presumably come first, they are increasingly expensive as well).
To attempt to artificially maintain the value of something that is becoming an increasingly losing proposition as the core asset will fail unless the overvalued, overbuilt homes come down in value and new homes are built on a rational scale for what the real future holds.
My parents shared a small house with an uncle’s family for the first 3 years, and first 6 kids combined, of their young families’ lives. That was after living in apartments with the first kids. That’s what people did, and then, if things worked out, slowly moved up - that’s what people and the system could afford, and it worked. People had steady employment and rising real incomes. That world is gone because it was thrown away by big finance and multinationalization. The substitute was to create an Everest, over decades, of “assets” (homes) anchoring a finance sector and those “assets” have now become liabilities on the system as a whole. It isn’t just debt, it’s a fundamental re-ordering of valuation.
I’m well aware that this is going to be denied up and down by many, but to me it’s absolutely clear and right in front of us - you might just as well live in the Southwest and deny there’s a water problem.
- BedRock
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
No comments yet.