I just read a long article about the misfortunes that have befallen the Golden State. Unemployment is approaching 12%. Houses are in foreclosure. Vast numbers of others are mortgaged for more than they are worth. People are leaving in such numbers that we may lose a congressman in the next census. Van Jones, the recently fired administration czar of green jobs and economics is seen as proposing what to do about it.
This article and every other article looks right at the problem and doesn't see it. Boom-and-bust cycles are exacerbated beyond bearing by speculators. When prices are going up, they artificially increase demand and force prices higher and higher, often out of reach of most real buyers. Speculation forces prices to unrealistic levels. When the real buyers, people who want to live in the homes they buy, are forced out of the market, demand wilts and prices fall.
When prices fall, speculators, who had been holding property solely for appreciation, begin to dump their property en masse. That floods the market and falling prices become plummeting prices. Real sellers of their own homes, the homes they live in, are ruined. Their houses become worth less than they owe on them and their life savings are wiped out.
The problem could easily be fixed by taking the profit out of speculation. Substantial tax penalties for single family houses owned by people who do not live in them would do it. Tax penalties on short term sales of rental property would have similar results.
The reason we never hear this suggested is that speculators include most of the rich people in the state. Banks and the real estate industry make a fortune on the repeated buying and selling of the speculation. House-owners, not home-owners, pay for both political parties.
So they are going to blame everybody and anybody and talk about green jobs and an endless amount of other irrelevant trash. No word but this one will ever be spoken about the speculation that caused both the bubble and the collapse and will doubtless cause future ones.
This article and every other article looks right at the problem and doesn't see it. Boom-and-bust cycles are exacerbated beyond bearing by speculators. When prices are going up, they artificially increase demand and force prices higher and higher, often out of reach of most real buyers. Speculation forces prices to unrealistic levels. When the real buyers, people who want to live in the homes they buy, are forced out of the market, demand wilts and prices fall.
When prices fall, speculators, who had been holding property solely for appreciation, begin to dump their property en masse. That floods the market and falling prices become plummeting prices. Real sellers of their own homes, the homes they live in, are ruined. Their houses become worth less than they owe on them and their life savings are wiped out.
The problem could easily be fixed by taking the profit out of speculation. Substantial tax penalties for single family houses owned by people who do not live in them would do it. Tax penalties on short term sales of rental property would have similar results.
The reason we never hear this suggested is that speculators include most of the rich people in the state. Banks and the real estate industry make a fortune on the repeated buying and selling of the speculation. House-owners, not home-owners, pay for both political parties.
So they are going to blame everybody and anybody and talk about green jobs and an endless amount of other irrelevant trash. No word but this one will ever be spoken about the speculation that caused both the bubble and the collapse and will doubtless cause future ones.
California needs to sort out its laws first. I blame the mad hippies in Berkely for pushing things like 'state ballots'. All that came out of them was voter demands for increased spending, which also demanding decreased taxes. Wham! Thats why California is fucked.
ReplyDelete(And the housing crash, massive crime, unemployment, high poverty, and all the rest might just kill the Californians off entirely.)
Undoubtedly. All 36 million of us lying on the ground with XX's over our eyes, making the Q-sign.
ReplyDelete