I was in Hollywood a few weeks ago and visited a place which looked like a trailer without wheels to me... But they pay $1350 rent a month. The materials were kinda cheap, it was cold... How long is this bubble going to last?A respondent named Phil Scott (who immediately got onto my good side by calling himself "Phil Scott" instead of some inane nick) offered a view of the housing crisis which expanded into a forecast of economic apocalypse. I wish I didn't find his analysis compelling.
Now, I know nothing about this man beyond what you read below. No doubt, he is no economist -- just an average Joe. Like me. There are times, though, when the world would be well advised to pay more attention to what the Joes have to say.
Granted, this essay amounts to a rant. Granted, it is hyperbolic. No, I don't agree with every point.
I am in particular disagreement on the subject of taxation: The "low taxes" mantra is the very mechanism by which the empire-builders have achieved power, and no amount of propaganda or historical revisionsim can disguise the fact that this country has always prospered during times of highly progressive taxation. Employers, not IRS auditors, force most people to "work themselves to death."
Even so, I find this warning quite interesting. I hope Mr. Scott does not mind my repeating his words here, substantially edited for style and length (but not for content):
The US will most likely continue to handle this mess as they have over the last four years: by debasing the currency. In that case, dollar prices for real estate will rise or stay level as real value erodes. The banking structure will stay intact because the banks are also paying off their loans with devalued dollars.
The real problem occurs when wages cannot match the inflation of the dollar. That's because the only way to pay off the debt (and it has to be paid, or the nation collapses) is to over-work the working class. That factor will decimate the US as a nation. First its economy will falter, then its world hegemony will disappear.
This is happening now. It will get worse at light speed over the next four years as the core of the work force ages and dies or retires, with few competent replacements.
The real estate bubble may never burst. It may just hyper-inflate.
If the state and federal governments begin seizing property to satisfy tax liens, that tactic will fail. In the first place, the home 'owner' has less actual equity than the property is worth or can be sold for. In the second place, a large number of distressed properties will crash the real estate market, even with hyper-inflated dollars.
So the feds won't even be seizing homes -- just threatening to do so. But when the home "owner" finds that his job has moved to China -- and that he has no job prospects, no income, and pays no taxes -- he will not be able to respond to threats from the government. The turnip will have been bled dry. Even shipping him off for Abu Ghraib-type abuse will not bring any revenue. No jobs, no revenue, no taxes -- as state and federal debt skyrockets.
That will be the major problem.
How will it be handled? Look at the rest of the world, and you will see examples everywhere -- in Russia, India, even in many parts of Europe. We will see more people living in less space, and closer to the bone.
That's the 'solution.'
That solution will stay in effect until a national government decides to tax its people to starvation levels. When the government receives no tax income, it will finally have to let the bureaucrats starve as well. Those bureaucrats will then individually begin to extort the citizens, a la the Mexican police. As that process continues, complete collapse ensues.
That's the secenario for nations which seek empire and spend their national treasure on wars.
For those nations like Sweden and Denmark, which seek no empire, a balance is reached between a bloated government and over-taxation. Everyone eats well and lives fairly decently, unless a tyrant comes to power.
The United States -- because of its built-up infrastructure, farms, shore lines, huge land mass, etc. -- will simply lose its empire as its tax base collapses...
First, economic losses of huge magnitude will occur over the next four years. But we will still have empire and be able and willing to carpet bomb any recalcitrant nation into a bloody pile of meat and bones.
Then, as China rises to dominate world commerce, we will face crippling economic sanctions from the rest of the world. This will cost us world dominance.
With loss of empire, loss of control over oil prices, loss of world markets, and no way to rip off third-world nations via our bogus loan programs, the U.S. economy will suffer very badly indeed. The piper will have to be paid in full. By then, over half (the top and most experienced half) of our current working population will be old and retired or dead. Meanwhile, China and India are growing exponentially and already have world-class universities.
On the real estate issue, you will see civil servants as the new upper class, buying up the distressed homes. For instance, San Francisco police officers can buy distressed property from the state at half the price paid by a private citizen.
The individual who wants to do well can either become a landlord and hope to hold the property against ruthless taxation -- or he can stay small, live cheaply, and work modestly so there is little to tax and nothing to seize for non-payment. Most will end up in this last category. The smartest people will develop world-class skills while living in this fashion, which may allow them recreation time and a relaxed life. But if too many people fall into this category, their host government will be decimated. The government needs most members of the public to work themselves to death in order to pay taxes, to insure that the government will survive and civil servants can retire at five times the average annual income.
The culture does indeed go quite insane during the final stages of empire.
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