Tuesday, June 23, 2009

Green shoots and ghost towns

I haven't much time to write at the moment, so this will be brief. A few days ago, I had reason to travel over a fair amount of Southern California -- Los Angeles, the Inland Empire, and points beyond. One feature of the landscape caught my attention: Empty office spaces and empty industrial buildings.

It was eerie. The lights were off and nobody was home. California's business parks look like the "evacuated city" montage you might see at the end of a movie about invading Martians. I helped a friend empty out the office and warehouse he has maintained for fourteen years. What unsettled me was not just the fact of his leaving, but the fact that he seemed to be one of the last to leave a sprawling commerce center.

The blogosphere contains much talk of economic improvement. Green shoots. If that's so, then why does so much of California look like a ghost town?

I suspect that this person's crystal ball may prove more accurate than will the predictions of the green shooters. Forgive the long quotation:
It does seem as if the vast majority of people in the United State of America are going to become like medieval serfs, living at what feels in the post-gilded-age new realities like subsistence, watching a small slice of society from a distance as they jet in and out of the country, monopolize the ski resorts, continue to live in big houses with two or three thousand square per person, and so on.

The Baby Boom doesn’t have enough money to retire (quaint notion) and will be working till they drop, which will actually extend their lives. The Gen X’ers will continue to live on scraps. The Millennials are idealistically waiting their turn to be heroes while trying to find a way to support themselves in a workforce that is top-heavy with whining Boomers and cagey Gen X’ers. Most of us will work for large or small corporations at a wage that is enough to support a modest lifestyle, but holidays will be spent close to home. We will worry that we may be next to join the ranks of the unemployed, many of whom and whose stories we know—stories of lost jobs, houses, children’s sense of security in forced moves to strange communities. The health consequences of the current crisis are no doubt predictable. In a PBS special on other countries’ health programs, a German was asked if unemployed people lose their health benefits there. Of course not, he said. They are under great stress and risk to their health. They need health benefits more than anyone.

For a developed nation, America is a barbaric place.

Demand will not recover. The Stimulus, piling upon preexisting terrifying trillions in deficits courtesy of Bush, will not work. Spending will be cut to satisfy our external creditors. The sheer weight of the debt will slow the economy. The narrow U3 unemployment rate will rise into the double digits and stay there through the president’s term. The “real” under- and unemployment rate U6 will hit twenty percent, and stay in the high teens.

The poor and disenfranchised may even take to the streets at some point. Americans are pretty timid now, worried that they’ll be called terrorists and disappear in the night or be put on the no-fly list. Habeas corpus is gone. Last September Hank Paulson said we may need martial law. The government has been preparing for it. There are empty prison camps standing ready, according to reliable reports. (Many were built by Halliburton, allegedly.) The Katrina experience showed us what to expect: mercenaries will disarm the public; impose martial law; tell you to stay in your house or get shot. FEMA’s National Level Exercise scheduled for late July is supposedly a counter-terrorism drill, but I would bet it involves practicing how to impose martial law.
Hyperbolic? Paranoid? One hopes so.

Right now, hope seems to be America's only product.


Anonymous said...

How are baby boomers supposed to work till they drop when they're being laid off?

Anonymous said...

The purported existence of green shoots is not contradicted by the existence of blighted areas. That is sort of built into the definition of green shoots-- that they are the signs of the beginning of the return of some growth, IN THE MIDST OF BLIGHT!

Actually, not now certainly but theoretically in the medium term, we could be well into a noticeable recovery that is agreed to by a consensus of observers, that STILL features on-going economic blight in given areas, which in fact may never recover in our lifetimes.

Some sizeable fraction of the vastly overbuilt residential real estate development and the equally or more overbuilt commercial sector is simply going to fail, be abandoned, be converted to other uses, or simply be destroyed. The idea of a recovery itself, still less green shoots in advance of a recovery, doesn't imply a return to the full status quo ante, or necessarily anything remotely similar.

And it goes without saying that SoCal is a very blighted place right now, having ridden that bubble up a long way, with that much further to crash down before an equilibrium can set in.


dakinikat said...

Sheesh, and I thought I was the dismal scientist around here

Brad said...

I was driving through Studio City the other day, and there are literally twice as many small shops available for rent as there were two weeks ago. Very sad. A real estate firm by the name of Piken became the agent for most of those shops over a decade go, and has burned through the local vendors like nothing I've ever seen. Make a few bucks and your shop space rent will increase by 400% when your lease up. So they have very few businesses with the kind of longevity and customer base that it takes to survive this kind of downturn.

Everywhere I go in Southern California, there are For Rent signs - gated communities, business districts and in the suburbs. Still, rents are high. A one bedroom apartment in the valley is still over $800.

We would be a much healthier nation if we could bring ourselves to admit that we need housing that reflects local wages, health care for everyone and mass transit that removes the need for lower income families to own cars. We cannot bring ourselves to admit that making life manageable for people who are lower income is good for the economic health of the nation. It stabilizes the economy for everyone.

The hostility of the class war is so high and so hot right now, that it may destroy our nation. I honestly am getting to the point, after the embarassment of the Obama election, that I'm regretting being an American.

There is a lot I like about this nation, but our aggressive hostility towards lower income families and middle income families is immature and destructive.

Anonymous said...

With a little luck the Swine Flu will cut down the excess population and create lots of job openings.

gary said...

Back in 2001 and 2002 I was doing outside sales in the Silicon Valley. I noticed then a lot more empty buildings in the various business parks and districts than previously. Arques Ave in Sunnyvale for example, once nearly full, then more and more vacant buildings and for-sale signs.

I remember one brand-spanking-new park in Milpitas. It had recently opened and had one tenant. The other buildings were empty and remained so. Parks like that one have a fairly long lead time for financing and building.

I think we were in a recession then and I'm sure it's worse now. For one thing I had a job then.

I really believe that this whole country was looted during the Bush years, just like the savings-and-loans were earlier. I also still believe that Gore and Kerry were robbed. Can you imagine where we would be if Al Gore had taken office? If only ...

Anonymous said...

What a coincidence - I sent the same blog post to a number of my friends. Was a perfect summary of my views. But really it isnt so bleak. Think of it as a back to basics economy. A latte-free economy.

Also on the Fed notes, you are right, the pieces of paper would be bank notes not bonds, for a whole host of reasons.

And I know I am off post but just on the Iran thing. I read a piece by Larry Lindsey which suggested most in Washington knew that Ahmedinejad had won the election. Yes there were irregularities but hey, what about Ohio/Florida etc. I'm struck by the aggression with which Obama/Bibi are playing this.

Are we getting close to a bombing run? Will it be for their own good? To help them?

Sorry about the idle spec.


Zee said...

Very pertinent worry, Joseph. To this day Detroit has ghost buildings.

In my own town these stupid landlords drive out cherished small businesses by raising rent. However, development continues, new shops arrive, we're luckier than most, so far...

Peter of Lone Tree said...

Bank decides to bulldoze new homes (Victorville, CA)

Joseph Cannon said...

Peter, I know someone in construction who heard the deal about those homes. They looked good on the outside but were unfinished on the inside. Squatters and homeless folk were taking up residence within. The city or county stiffly was fining the company.

soupcity said...

Here in NE Ohio the "for sale" signs are now hidden by the "green shoots" aka: weeds.

Now there are giant neon green "D"'s painted on the once beautiful, sturdy brick homes that have been stripped of all innards that can be turned in for quick cash.

I assume that the "D"'s stand for demolition.

It is DEAD here.

glennmcgahee said...

This is happening all over the country. If you have a home, you have probably lost your job or are worried its gonna happen soon.As a landlord, I can say that all my property is for sale at greatly reduced prices. The city utilities have gone up, insurance has gone up, I need to raise rents but half my tenants have lost jobs. To evict or not to evict, that is the question. Even I can not afford the many costs of evictions if I wanted to do it. I've become close to my tenants and feel for them. At the same time, I am unable to support them if I wanted to. Its all too distressing.I just wanted to break even, not make alot of money.I'm losing my shirt.

Anonymous said...

The idea of a recovery itself... doesn't imply a return to the full status quo ante, or necessarily anything remotely similar.

It does if the economy is run properly, i.e., by liberals. Which leaves Obama out, of course.

Sergei Rostov