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Venture Stories by Village Global -- A Deep Dive on Housing with Kim-Mai Cutler and Alex Danco
'This episode features Kim-Mai Cutler (@kimmaicutler) of Initialized Capital and Alex Danco (@Alex_Danco) of Social Capital. -- They start out by talking about the huge rise in housing prices over the last decades in the Bay Area and the fact that there is now net-negative domestic US migration to the Bay Area. They discuss the reasons for this, including the fact that in California, property taxes are paid on the value of the property when it was purchased, not the market value. -- They talk about land and property more generally and the fact that at one time in the past property was something that would produce something (like crops or livestock) as opposed to simply remain stagnant but appreciate in value. -- They discuss the policies that have led to the housing crisis in the Bay Area and some of the current attitudes in the US towards housing that are counter-productive. They also talk about what would need to change for the housing crisis to abate, new forms of property rights, and why the financial crisis of the late 2000s didn’t fundamentally change anything about the overheated housing market.' -- "Land and capital are not the same."
economics  geoism  land  rentseeking 
8 weeks ago by adamcrowe
Alex Danco -- What happens if building more housing doesn't work?
'...The third factor that somehow gets left out of a lot of armchair debates about housing and yet is an essential (possibly THE essential) element in all of this is credit. -- Houses are big purchases, and we almost always buy them on credit and pay off the mortgage over time. Even if you have cash in hand, you will probably still opt for a mortgage: it's ultra cheap cost of capital, subsidized by the government. You should probably take it! Over the last century, in the United States and many (although not all!) western countries, we’ve entered and perpetuated a durable, positive feedback cycle where the supply of credit and the price of housing has mutually reinforced each other upwards. -- Houses aren’t just a place we live anymore, they’ve been thoroughly financialized as a path to wealth creation. My wife and I bought a house last year, and it continually amazes me how much economic leverage has been productized and packaged up into “Homeownership”. Most homebuyers don’t really understand how powerful what they’ve signed is, nor how sophisticated the machinery is behind it in order to make it just work.  -- The thing with positive feedback cycles is that they necessarily come to an end, unless there is some enormous reservoir of resources they can draw from in order to keep perpetuating. -- ... When a young, educated professional moves to a big city, they instantly become richer, without even realizing it. How? Their income earning potential has gone up, as the options available to them to earn that income have multiplied. From an expected-future-earnings point of view, a young professional massively increases the present value of their future income just by moving to New York or Toronto or San Francisco, period. -- Furthermore, many of these young professionals come from families that are financially comfortable enough for their parents to be able to assist with down payments if necessary. Had they stayed in Nashua or Cleveland, they might never have needed to tap this wealth; but moving to an expensive city to pursue a prestigious career is a pretty common prompt for people to ask parents for financial help. It's another important source of “creditworthiness” that may go overlooked when people think about urban inequality, but it’s a big one. -- Anyway, these professionals then promptly spend that creditworthiness. They spend it on a mortgage (or on renting while they save up for a mortgage.) And if dense cities are genuinely increasing that young professional’s earning power and creditworthiness, what do we expect is going to happen? That increased future earning power is going to get capitalized in the form of higher prices on those condos and starter houses that these young professionals are buying. The high price is justifiable, though, because it’s not an expense, it’s an “investment”. -- What this means is that we can effectively add a new contributing arrow to our diagram above: the act of moving to a city, just the act of doing it, increases your wealth if you’re an “above the wedge” professional. Your future earnings go up, because density works in your favour with increased job turnover. If someone is willing to lend to you, then you can turn those future earnings into present-day capital. And the housing market is how we do that. -- Paradoxically, and here’s the bad part, this brings us to this absurd but understandable situation where increasing the supply of this very specific kind of housing actually makes their price go UP, not down. Building more of them means more room for more young professionals to move in, bringing in new options of creative class jobs, which in turn increases the net present wealth of the people who were already there, which (circularly) gets capitalized into the cost of all of the new condos that are going up. -- #Putting the three together: If you put these three things together... -- There is a particular kind of housing - condos - that has become this financial asset that’s absorbed and capitalized the network effect density gains of young professionals all moving in close to each other. It gets multiplied by accelerated job turnover: the more jobs you have in an average career, the stronger this network effect will be. For various reasons, condos has become one of the main levers we’re able to pull when we collectively decide to build more housing. What I’m worried about is the possibility that we’ve entered this feedback loop in which building more supply doesn’t really help affordability for anyone below the wedge. Each incrementally added condo makes all others “worth more” (assuming an ample supply of credit) by increasing the pool of creative class employees and job options, while doing nothing for affordability for anyone below the wedge. -- The denser the city gets, the more bifurcated the job market becomes; the ready supply of credit that’s available means that any given unit that’s built is going to get priced not at what the local labor market can support, but rather what the “young professional creative/credit engine” can support, even if those young people moving in don’t have high incomes yet. The more young professionals there are that emerge out of the rest of the country and move into those homes, the greater their sum creditworthiness becomes: in a world of high job turnover, the presence of more young professionals makes you wealthier if you’re also a young professional (because it increases the pool of all your future jobs), but not otherwise; that wealth gets capitalized immediately into your condo price, and is happily financed for you by your bank. -- My worry, and I hope I’m wrong here, is that on average, adding more housing units just makes this cycle spin faster. (Unless you could add SO MANY housing units that you could actually break through the wedge, that is. But that seems to me like it’d be hard to do! That would also be quite unpopular locally, as it would undermine an awful lot of locally built up wealth, and any move to do that is usually unviable politically.)'
economics  land  rentseeking  ponzi  cities  gentrification 
8 weeks ago by adamcrowe
Michael Hudson -- Up in Arms
'...#MH: The first U.S. business schools in the late 19th century described rentiers as unproductive. That is why today’s neoliberals are trying to rewrite the history of Institutionalism in a way that expurgates the Americans who wanted the government to provide public infrastructure to make America a low-cost economy, undersell England and other countries, and evolve into the industrial giant it became by the 1920s. -- #JS: That was Simon Patten’s teaching at the Wharton School — government-subsidized public infrastructure as the fourth factor of production. -- #MH: Yes. America’s ruling political class tried to make the United States a dominant economy instead of a rentier economy of landlords and financial manipulators. -- #JS: How did the robber barons fit into this story? -- #MH: Not as industrialists or manufacturers, but as monopolists opposed by the industrial interests. It was Teddy Roosevelt’s trust-busting and the Republicans that enacted the Sherman antitrust act. Its spirit was continued by Franklin Roosevelt. -- #JS: Is today’s economy a second age of robber barons? -- #MH: It’s becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free market — that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly rent and financial extraction. -- #JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring. It certainly wasn’t in Paul Samuelson’s textbook that we were given. --- #MH: There’s little logic for neoliberalism beyond a faith that short-term greed is the best way to optimize long-term growth. It is natural for the wealthiest classes to have this faith. Neoliberalism doesn’t look at the economy as a social system, and it excludes as “externalities” concerns with the environment, debt dependency and economic polarization. It only asks how to make a short-term hit-and-run gain, regardless of whether this is done in a way that has a positive or negative overall social effect. Realistic economic logic is social in scope, and distinguishes between earned and unearned income. That is why economists such as Simon Patten and Thorstein Veblen decided to start afresh and create the discipline of sociology, to go beyond narrow individualistic economics being taught. -- The starting point of economic theorizing should explain the dynamic that lead economics to polarize and collapse. That is the lesson of studying antiquity that we have discussed in our earlier talks. Writers in classical antiquity, like Bronze Age Near Eastern rulers before them and the Biblical prophets, recognized that a rentier economy tends to destroy the economy’s productivity and widespread prosperity, and ultimately its survival. In today’s world the Finance, Insurance,and Real Estate [FIRE] sector and monopolies are destroying the rest of the economy, using financial wealth to take over the government and disable its ability to prevent their operating in corrosive and predatory ways. -- #JS: Why aren’t more people up in arms? -- #MH: They’re only up in arms if they believe that there is an alternative. As long as the vested interests can suppress any idea that there is an alternative, that matters don’t have to be this way, people just get depressed. In our third interview you spoke about Socrates and the Stoics producing a philosophy of lamentation and resignation. By his day there seemed no solution except to denounce wealth. When matters got much worse in the Roman Empire, wealth was abhorred. That became the message of Christianity. -- What is needed is to define the scope of the alternative that you want. How can the economy grow when households, business, and government have to pay more and more of their revenue to the financial sector, which then turns around and lends its interest and related income out to indebt the economy even more? The effect is to extract even more income. Rising government debt and tax cuts for the rentiers lead to the privatization of public infrastructure and natural monopolies. Higher prices are charged for tolls to pay for public healthcare, education, roads and other services that were expected to be provided for free a century ago. Financialized privatization thus creates a high-rent, high-cost economy — the opposite of industrial capitalism evolving into socialism to finally free society from rentier income.'
history  economics  debt  landlordism  rentseeking  financialization  "capitalism"  parasitism  MichaelHudson  obfuscation 
april 2019 by adamcrowe
Michael Hudson -- The DNA of Western civilization is financially unstable
'...#MH: Near Eastern debt cancellations continued into the Neo-Assyrian and Neo-Babylonian Empires in the first millennium BC, and also into the Persian Empire. Debt amnesties and laws protecting debtors prevented the debt slavery that is found in Greece and Rome. What modern language would call the Near Eastern “economic model” recognized that economies tended to become unbalanced, largely as a result of buildup of debt and various arrears on payments. Economic survival in fact required an ethic of growth and rights for the citizenry (who manned the army) to be self-supporting without running into debt and losing their economic liberty and personal freedom. Instead of the West’s ultimate drastic solution of banning interest, rulers cancelled the buildup of personal debts to restore an idealized order “as it was in the beginning.” -- This ideology has always needed to be sanctified by religion or at least by democratic ideology in order to prevent the predatory privatization of land, credit, and ultimately the government. Greek philosophy warned against monetary greed [πλεονεξία,pleonexia] and money-love [φιλοχρηματία, philochrêmatia] from Sparta’s mythical lawgiver Lycurgus to Solon’s poems describing his debt cancellation in 594 and the subsequent philosophy of Plato and Socrates, as well as the plays of Aristophanes. The Delphic Oracle warned that money-love was the only thing that could destroy Sparta [Diodorus Siculus 7.5]. That indeed happened after 404 BC when the war with Athens ended and foreign tribute poured into Sparta’s almost un-monetized regulated economy. -- The problem, as famously described in The Republic and handed down in Stoic philosophy, was how to prevent a wealthy class from becoming wealth-addicted, hubristic and injurious to society. The 7th-century “tyrants” were followed by Solon in Athens in banning luxuries and public shows of wealth, most notoriously at funerals for one’s ancestors. Socrates went barefoot [ἀνυπόδητος, anupodêtos] to show his contempt for wealth, and hence his freedom from its inherent personality defects. Yet despite this universal ideal of avoiding extremes, oligarchic rule became economically polarizing and destructive, writing laws to make its creditor claims and the loss of land by smallholders irreversible. That was the opposite of Near Eastern Clean Slates and their offshoot, Judaism’s Jubilee Year. -- #JS: So despite the ideals of their philosophy, Greek political systems had no function like that of Hammurabi-like kings — or philosopher-kings for that matter — empowered to hold financial oligarchies in check. This state of affairs led philosophers to develop an economic tradition of lamentation instead. Socrates, Plato and Aristotle, Livy and Plutarch bemoaned the behavior of the money-loving oligarchy. But they did not develop a program to rectify matters. The best they could do was to inspire and educate individuals — most of whom were their wealthy students and readers. As you said, they bequeathed a legacy of Stoicism. Seeing that the problem was not going to be solved in their lifetimes, they produced a beautiful body of literature praising philosophical virtue. -- #MH: The University of Chicago, where I was an undergraduate in the 1950s, focused on Greek philosophy. We read Plato’s Republic, but they skipped over the discussion of wealth-addiction. They talked about philosopher-kings without explaining that Socrates’ point was that rulers must not own land and other wealth, so as not to have the egotistical tunnel vision that characterized creditors monopolizing control over land and labor. -- ... Socrates said that if you let the wealthiest landowners and creditors become the government, they’re probably going to be wealth-addicted and turn the government into a vehicle to help them exploit the rest of society. -- ... #MH: Socrates’s problem was to figure out a way to have government that did not serve the wealthy acting in socially destructive ways. Given that his student Plato was an aristocrat and that Plato’s students in the Academy were aristocrats as well, how can you have a government run by philosopher-kings? Socrates’s solution was not practical at that time: Rulers should not have money or property. But all governments were based on the property qualification, so his proposal for philosopher-kings lacking wealth was utopian. And like Plato and other Greek aristocrats, they disapproved of debt cancellations, accusing these of being promoted by populist leaders seeking to become tyrants.'
history  economics  debt  landlordism  rentseeking  financialization  "capitalism"  parasitism  MichaelHudson  obfuscation 
april 2019 by adamcrowe
Michael Hudson -- Mixed economies and monopoly
'...#MH: The key public concern throughout history has been to prevent debt from crippling society. That aim is what Babylonian and other third-millennium and second-millennium Near Eastern rulers recognized clearly enough, with their mathematical models. To make an ideal society you need the government to control the basic utilities — land, finance, mineral wealth, natural resources and infrastructure monopolies (including the Internet today), pharmaceuticals and health care so their basic services can be supplied at the lowest price. -- All this was spelled out in the 19th century by business school analysts in the United States. Simon Patten [1852-1922] who said that public investment is the “fourth factor of production.” But its aim isn’t to make a profit for itself. Rather, it’s to lower the cost of living and of doing business, by providing basic needs either on a subsidized basis or for free. The aim was to create a low-cost society without a rentier class siphoning off unearned income and making this economic rent a hereditary burden on the economy at large. You want to prevent unearned income. -- To do that, you need a concept to define economic rent as unearned and hence unnecessary income. A well-managed economy would do what Adam Smith, David Ricardo, John Stuart Mill, Marx and Veblen recommended: It would prevent a hereditary rentier class living off unearned income and increasing society’s economic overhead. It’s okay to make a profit, but not to make extractive monopoly rent, land rent or financial usury rent. -- #JS: Will human beings ever create such a society? -- #MH: If they don’t, we’re going to have a new Dark Age. -- #JS: That’s one thing that especially surprises me about the United States. Is it not clear to educated people here that our ruling class is fundamentally extractive and exploitative? -- #MH: A lot of these educated people are part of the ruling class, and simply taking their money and running. They are disinvesting, not investing in industry. They’re saying, “The financial rentier game is ending, so let’s sell everything and maybe buy a farm in New Zealand to go to when there is a big war.” So the financial elite is quite aware that they are getting rich by running the economy into the ground, and that this must end at the point where they’ve taken everything and left a debt-ridden shell behind. -- #JS: I guess this gets back to what you were saying: The history of economics has been expurgated from the curriculum. -- #MH: Once you strip away economic history and the history of economic thought, you wipe out memory of the vocabulary that people have used to criticize rent seeking and other unproductive activity. You then are in a position to redefine words and ideals along the lines that euphemize predatory and parasitic activities as if they are productive and desirable, even natural. -- ... As the Greek philosophers recognized, wealthy people define their power by their ability to injure the rest of society, so as to lord it over them. That was the Greek philosophy of money-lust [πλεονεξία, pleonexia] and hubris [ὕβρις] — not merely arrogance, but behavior that was injurious to others. -- Rentier income is injurious to society at large. Rentiers define a “free market” as one in which they are free to deny economic freedom to their customers, employees and other victims. The rentier model is to enrich the oligarchy to a point where it is able to capture the government.'
history  economics  debt  landlordism  rentseeking  financialization  "capitalism"  parasitism  MichaelHudson  obfuscation 
april 2019 by adamcrowe
Michael Hudson -- The Delphic Oracle as their Davos
'... #JS: let’s start with Rome. What do you want to say about the nova libertas, the “new liberty” proclaimed in Rome after the last king was expelled and the Republic was founded? Didn’t Brutus and his wellborn friends boast that they were the institutors of true liberty? -- #MH: Liberty for them was the liberty to destroy that of the population at large. Instead of cancelling debts and restoring land tenure to the population, the oligarchy created the Senate that protected the right of creditors to enslave labor and seize public as well as private lands (just as had occurred in Athens before Solon). Instead of restoring a status quo ante of free cultivators — free of debt and tax obligations, as Sumerian amargi and Babylonian misharumand andurarum meant — the Roman oligarchy accused anyone of supporting debtor rights and opposing its land grabs of “seeking kingship.” Such men were murdered, century after century. -- Rome was turned into an oligarchy, an autocracy of the senatorial families. Their “liberty” was an early example of Orwellian Doublethink. It was to destroy everybody else’s liberty so they could grab whatever they could, enslave the debtors and create the polarized society that Rome became. -- #JS: OK, but this program worked. The Republic grew and grew and conquered everyone else for century after century. Then the Principate became the supreme power in the Western world for several more centuries. -- #MH: It worked by looting and stripping other societies. That can only continue as long as there is some society to loot and destroy. Once there were no more kingdoms for Rome to destroy, it collapsed from within. It was basically a looting economy. And it didn’t do more than the British colonialists did: It only scratched the surface. It didn’t put in place the means of production that would create enough money for them to grow productively. Essentially, Rome was a financial rentier state. -- Rentiers don’t create production. They live off existing production, they don’t create it. That’s why the classical economists said they were supporting industrial capitalists, not British landlords, not monopolists and not predatory banks. -- #JS: This has all been forgotten, both in the United States and in England — -- #MH: Let’s say, expurgated from the curriculum. -- #JS: Worse than forgotten! -- #MH: That’s why you don’t have any history of economic thought taught anymore in the United States. Because then you’d see that Adam Smith, John Stuart Mill and the “Ricardian socialists” and indeed most of the 19th century had a completely opposite idea of what constituted a free market.'
history  economics  debt  landlordism  rentseeking  financialization  "capitalism"  parasitism  MichaelHudson  obfuscation 
april 2019 by adamcrowe
YouTube -- Freedomain Radio: Thought Bites: The REAL Reason for Endless Immigration...
"The banks, the financial institutions, and the whole house of cards economy that runs on debt, can't handle a significant and sustained loss in housing prices." -- The Business Cycle: A Geo-Austrian Synthesis by Fred Foldvary
economics  land  rent  rentseeking  malspeculation  malinvestment  businesscycle  landcycle  population  migration  welfare  ponzi  StefanMolyneux 
march 2019 by adamcrowe
South China Morning Post -- A fifth of China’s urban housing supply lies empty, equivalent to 50 million homes
'...Soon-to-be-published research will show roughly 22 per cent of China’s urban housing stock is unoccupied, according to Professor Gan Li, who runs the main nationwide study. That adds up to more than 50 million empty homes, he said. -- The nightmare scenario for policymakers is that owners of unoccupied dwellings rush to sell if cracks start appearing in the property market, causing prices to spiral. The latest data, from a survey in 2017, also suggests Beijing’s efforts to curb property speculation - considered by leaders a key threat to financial and social stability - are coming up short. -- “There’s no other single country with such a high vacancy rate,” said Gan, of Chengdu’s Southwestern University of Finance and Economics. “Should any crack emerge in the property market, the homes to be offloaded will hit China like a flood.”' -- ... Housing speculation has bedevilled China’s leaders for years, as some cities and provinces tightened buying restrictions only to see money flooding into other areas. Rampant price gains also mean millions of people are shut out from the market, exacerbating inequality. Xi famously said in October last year that “houses are built to be inhabited, not for speculation.” -- Holiday homes and the empty dwellings of migrants seeking work elsewhere account for some of the deserted properties, but purchases for investment are a key factor keeping the vacancy rate high, according to Gan. That’s despite curbs across the country meant to discourage buying of multiple dwellings. -- There’s an economic cost to vacancies too because they’re a drag on supply, which puts upwards pressure on prices and crowds young buyers out of the market, according to Chen Kaiji, who co-authored a Federal Reserve Bank of St. Louis working paper called The Great Housing Boom of China.'
economics  land  malspeculation  rentseeking  china 
january 2019 by adamcrowe
Quillette -- Reversing the Descent of Man by Geoff Dench
'...Throughout history, men have been inclined towards being social outsiders. Their usefulness to communities varies much more than women’s, and depends greatly on the way in which social institutions define and reward their roles. Whereas most cultures seem to recognize this, in the West we have increasingly pretended that it is not the case. And we are now paying for our mistake. -- ... Women in all societies are more responsive to each other’s needs and more likely to see the point of a social contract. They need society more. The long and arduous process of child-rearing makes women value co-operation with others in a way that does not so readily apply to men. We are better able to get along by ourselves. Society is at heart female, and is built around shared motherhood. -- In all traditional cultures there is a more or less explicit awareness of the centrality of motherhood, and of the need to create complementary roles for men to give them a comparable stake in society. We all need to feel needed by others if we are going to act responsibly towards them. Unless adult men are given clear roles and duties their attachment to society is very tenuous. -- It is this need to provide men with a stake in society that has led to the emergence of patriarchy and it has two main aspects. Firstly, men are socially responsible for the support of particular women and children, usually their sexual partners and their own offspring. This makes men more like women, by giving them specific people to care about in the way that mothers have to care for their children. Secondly, they are given formal rights and duties, usually linked to “head of family” status, in society’s political and economic institutions. This increases their motivation and opportunity to carry out their family obligations. -- As David Gilmore’s cross-cultural study of men shows (1990), in the small handful of cultures without patriarchy, men live a narcissistic Peter Pan existence, putting very little into the community and leaving most of the labor to women. Such societies have not developed beyond a rudimentary level, and cannot compete with their more highly organized and structured neighbors. This is why there are so few of them. They are not a suitable model for modern industrial nations to copy. -- ... There is a strong class dimension to the problem of modern men, as the de-motivating effect of equal opportunities rhetoric does not affect all men equally. It is regressive in class terms. As the male provider role fades as a source of respect, men who can only realistically hope for low status work are the ones most likely to lose the will to seek jobs or retrain as old industries decline. Middle class men with more chance of interesting and prestigious jobs have incentives to succeed which need less boosting by family obligations. So they are not held back in the same way. -- I believe this is a powerful factor sharpening the polarization of our society into rich and poor sectors. The division is increasingly between an elite of “two-career” families who live in affluence, and an underclass of “no-work” families, or rather, non-families, as it is mostly within this section of the population that households are breaking up, with men increasingly unemployed, living alone, dying of self-neglect and losing faith that there is a useful place for them. Women in this underclass suffer great stress and poverty too, but they keep going because they know that they have valuable roles as mothers. -- Taxation policy could play a significant role here in averting broader social conflict at the same time as re-motivating men. Dual-earner households enjoy a disproportionate share of jobs and incomes, as well as tax benefits. Because they can afford double-salary mortgages, they have inflated the general level of house prices in cities. In spite of sometimes hiding behind leftish politics, they are one of the main drivers of increasing inequality.' -- Let them eat buy-to-let tenancy agreements!
civilization  rkselectiontheory  decadence  men  women  middleclass  rentseeking  UK 
december 2018 by adamcrowe
YouTube -- Keiser Report: The 1371 Days of QE (E1325)
'In this episode of the Keiser Report, Max and Stacy discuss the more than seven thousand euros per citizen of the EU created out of thin air by the ECB in its 1371 days of Quantitative Easing. Unless each citizen received the equivalent in asset price gains or cash, they have been robbed through inflation. They look at the conversation Stacy had online with an academic and a central banker about this very inflation. The academic couldn’t see inflation anywhere, whilst the central banker admitted that the point of QE was, indeed, to “cause” asset price inflation – i.e. house prices and stock markets. In the second half, Max interviews Professor Steve Keen, author of “Debunking Economics”, about the great unraveling of the Australian property market. Is it real this time? And what sort of government and central bank measures will be thrown at it to reflate the bubble?' -- Let them eat mortgages!
economics  centralbanking  QE  debt  malspeculation  rentseeking  landlordism  ponzi  SteveKeen 
december 2018 by adamcrowe
The Economist -- There is more to high house prices than constrained supply
'...The true explanation, the argument goes, is found by viewing a house as a financial asset. It produces implicit income: the saving on rent achieved by owning the property rather than renting it (or equivalent digs) from a landlord. Like all streams of income, this can be valued using an interest rate. And just like the dividends offered by stocks, or the coupons offered by bonds, monthly savings on rent, capitalised as house prices, have soared in value as global real interest rates have tumbled (see chart). -- Another version of the same argument says that house prices should be bid up until the cost of home ownership — which includes mortgage interest, as well as the lost opportunity to invest in something else — is about equal to rent. Over two decades the real cost of capital has roughly halved, says Mr Mulheirn. So you would expect prices to have roughly doubled. -- To bid prices up to the point where rental yields are comparable to bond yields, households need sufficient access to mortgage credit. That might not have been available, were it not for the “financialisation” of housing — the liberalisation of mortgage lending, sometimes funded by foreign capital, in the 1980s and 1990s. One such reform was the advent of buy-to-let mortgages in 1996, which made it easy for individual investors to speculate on property by becoming landlords. Foreign investors may also have contributed to the frenzy. -- If financial conditions can move house prices so much, how to tell if there is a housing shortage? One way is to look at rents, which measure only the supply and demand for a place to live, without any financial component. They paint a startlingly different picture. Since 2005 English rents have fallen in real terms. Even in pricey London, they are up by less than 4%. -- ... The historical link between interest rates and house prices is weak. That is because predictions of future capital gains tend to be what inflate and shrink property-market bubbles. America, Ireland and Spain experienced huge property-price booms in the mid-2000s, even as interest rates rose. Decades of low rates have not restored Japanese house prices to the high they reached amid the speculative fervour of the late 1980s and early 1990s.'
economics  land  rent  rentseeking  financialization  malspeculation  landlordism  "capitalism" 
november 2018 by adamcrowe
YouTube -- Mike Maloney: End Of The Global Real Estate Boom - Australia Braces For Impact
'Is this it? Is this the top of the real estate bubble? Mike Maloney thinks so, and the signs are everywhere. New York, Sydney, Toronto, London, Los Angeles…the world over, signs of real estate market excess and its resultant stress are emerging. In the Australian real estate market alone, $1.7 trillion in interest-only subprime loans have allowed a nation of borrowers to “buy” houses well beyond their means. Over the next 4 years, $500B-worth of these ticking time bombs come due, and are set to trigger a wave of defaults. This is just one example of the crazy eye-popping madness that has come to permeate world real estate markets. Join Mike as he explores what may well be the beginning of the end for the largest real estate bubble of all time.'
economics  land  rentseeking  malspeculation  debt  bubble  landcycle 
september 2018 by adamcrowe
Renegade Inc. -- Keen to debunk the world
"...Let's all get rich selling second-hand houses to each other. It has to fall over. You're not building a productive system which gives you a flow of resources, a flow of output over time, you're simply making existing assets more expensive and calling that production. So that *is* a ponzi scheme, and the banks are guilty of it, but at the same they're saying 'You shouldn't criticize us, you should criticize the people who bought the ponzi scheme off us.'" -- You can't con an honest John. -- -- "What causes higher house prices is higher leverage." -- "We're giving far more of our income to what is a basic consumption item that actually degrades over time; housing should not be increasing in price, and when you look at the long-term data, it doesn't."
economics  land  rent  rentseeking  landlordism  "capitalism"  delusion  debt  credit  financialization  businesscycle  landcycle  SteveKeen  * 
september 2018 by adamcrowe
YouTube -- Renegade Inc: STEVE KEEN on House Prices
'In this extract from the 'Keen To Debunk the world’ episode of Renegade Inc [], Prof. Steve Keen discusses property markets all over the world.' -- Let them eat Chinese landbankers!
economics  land  rentseeking  debt  delusion  ponzi  SteveKeen 
september 2018 by adamcrowe
Michael Hudson -- Life & Thought: An Autobiography
'...I registered at NYU and got a job with the Savings Banks Trust Company, which was the one commercial bank that all the savings banks put their own reserves in. There were 135 savings banks in New York and there are none anymore, they’ve all been cannibalized, they’ve been bought out by the commercial banks. But my job was to trace the savings in New York, how it grew exponentially and compare this to how it was lent out for mortgages. The chart of these deposits was like a heartbeat. The deposits in savings banks would grow every quarter when the dividends were paid. So I saw basically that people left their savings in the bank to grow automatically, exponentially by interest. I saw that this recycling of interest-bearing debt was pushed back into the housing market to bid up housing prices. -- Real estate is something that is not taught in any course in the United States economics. 80 percent of bank loans in America, England and much of Europe are real estate loans, but in the textbooks that students learn economics from, it is as if banks lend money to industry. Banks don’t lend a penny to industry to invest in capital goods and hire people. They lend money to buy out industry, to take it over, to cannibalize it and to strip assets, but not to create capital. They lend it as mortgages, they basically lend against assets, against homes, commercial real estate, stocks or bonds or some assets. So that I realized that in the textbooks, picture of how finance works were completely different from what I was taught at NYU. I had to take a money and banking course taught by an ideological Greek professor Stephen Rousseas, who had never worked in a bank in his life — none of my professors had ever worked in a bank, everything they know from the textbooks — and he had an article by a man who subsequently became a friend of mine, Hyman Minsky, who thought that the business cycle could be explained by savings banks putting their reserves in the commercial banking system that would be lent out to the economy. I said, “Look, what you called a commercial banking system is one bank, the bank I work for and we don’t make any loans at all to the economy. We buy bonds.” -- So I got a C-plus in the course, he said I didn’t understand textbook economics. I realized that there was an absolute contradiction between how the real economy worked and what was in the textbooks.'
economics  land  rent  rentseeking  financialization  "capitalism"  MichaelHudson 
august 2018 by adamcrowe
Forbes -- Millennials Aren't Having Kids. Here's Why That's A Problem For Baby Boomer Real Estate & Retirement
'Despite the popular urban mythology of Boomer life in the big city, more than 70% of Baby Boomers are still living in suburban and rural areas. An increasing number of soon-to-retire and recently retired Boomers are looking to downsize and cash out the decades of equity they have amassed in their homes as a source of income and a chance to live the good life. But how can they cash out without any buyers?' -- Muh land rent ponzi scheme
land  rentseeking  babyboomers  intergenerationalwarfare  malspeculation  economics  ponzi 
june 2018 by adamcrowe
YouTube -- Keiser Report: 'Medici cycle' in America (E1237)
Hudson: "The GDP statistics were designed by the finance sector to celebrate itself."
economics  rentseeking  financialization  malspeculation  credit  debt  ponzi  MichaelHudson 
june 2018 by adamcrowe
Michael Hudson -- China's housing: It Doesn't Have to be This Way
'...they’re faced with a problem that their students have all been sent to America to study economics and come back and ask “How do we get a free market?” -- I couldn’t believe that students in China were asking me about a free market. But that idea led President Xi a few months ago to say they’re thinking of letting in American and European banks. Well, I think this would be a disaster. If you let in the American and foreign banks, their product is debt! What are they going to lend money for? -- The answer is that they’re going to lend more money to buy apartments than other Chinese banks are willing to lend. That’s how banks increase their market share – a race to the bottom, into deeper and deeper debt. The new banks will lend on easier terms, with lower down payments. That provides buyers with even more credit to bid up the price of real estate. The effect will be to start pricing China out of the market. -- So this is a self-destructive move by China. Property is worth whatever a bank will lend, and foreign banks are going to be as aggressive as they were in America. What the Chinese don’t get is that the business plan of U.S. banks is fraud. Bill Black showed that in his analysis of the 2008 crisis. The junk-mortgage collapse was basically a fraud crisis. It may be repeated in China. In any case, it is a Trojan horse to financially bid up the price of housing, and maybe even education and anything else the banks can make loans on. That would make debt service so high that Chinese workers won’t be able to be hired to produce goods that are competitive internationally.'
economics  land  rentseeking  "capitalism"  financialization  debt  ponzi  predation  china  MichaelHudson 
june 2018 by adamcrowe

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