Bubbles at New Ruskin College
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Lecture Notes: 07-01-05
Bubbles
Here is a very good article on global bubbles:
Global Analysis: The Trouble with Bubbles is that the Economy Suffers When They Pop
By Allister HeathThe Business, LondonRISMEDIA, June 29
http://www.rismedia.com/index.php/article/articleview/10818/1/1/
What is still missing in the analysis is the examination of the influence of government on the bubbles. The Fed is an arm of government but there are many other ways government has caused the bubble.
For example consider that the bubble is worst in the Blue States and weakest in the Red States where zoning and building codes are less restrictive. The Blue Cities of Boston, New York, Chicago and San Francisco have artificially restricted supply and have therefore amplified the bubble.
These cities are the very same cities which were identified by the economists Glaeser and Gyourko as being the most restrictive on the housing market in their study, (see paper no. 1948. Edward L. Glaeser and Joseph Gyourko The Impact of Zoning on Housing Affordability, link: ( http://post.economics.harvard.edu/hier/2002papers/2002list.html )).
But even more fundamentally what is still missing in the analysis of the bubble is the basic market dynamic. Everyone tries to escape the market. Everyone seeks to place themselves outside the demands of the competitive market place.
However, only the powerful are able to extricate themselves. Yes, the rich of course. And the trade unions to the extent that they are able: nowadays this means public employee unions and the few private companies which have large capital investments which are difficult to relocate overseas and are therefore vulnerable to union action.
Unfortunately it is impossible to gain anything more than a temporary respite from the market. For the market tells us not what people say they want but what they really want what they really think.
For people are horrible liars. Not that they do not lie well, they do, but that they lie all the time and often for no reason at all. They will say they wish you well but really they would just as soon you burn in hell.
The rich for example know that the cost of housing should be no more than the cost of land, plus construction, plus interest on the capital. But why settle for such banalities when, by controlling the state, one can then control the market, and then, exercising such sovereign control one can reap usurious profits, ransoms such as once were paid by shipwrecked princes and sultans, profits such as weighed down Cortez’s men and sank them to the bottom of lake Texcoco?
Plunder!
And the gold is still there at the bottom of the lake, under the foundations of Mexico City, for in the end you can not after all take it with you.
This is why bubbles burst.
You can manipulate, distort, twist the market but in the end the truth will out.
Gore Vidal likes to remind us that the Venetians maintained their corrupt brutal rule of Crete for 800 years. True. But not anymore!
You can manipulate the tax laws to favor owners at the expense of renters, (and do it in the name of Liberalism, for sure, claim you are trying to build a “kinder gentler America”, yeah , yeah, sham on).
You can usurp the People’s sovereign power and down zone, and down zone, down zone five times in the last three decades, and drive up the price of housing beyond the reach of the People. (The average home in the Bay Area is now four times higher than what an average worker in California can afford to pay. (And this ! . . . was what the Liberals did to the People!!))
“ . . . In general, higher-income households that can easily afford to own a house without such subsidies get the bulk of the benefits.
“ Last year the National Bureau of Economic Research published a paper by two Wharton School economists, Todd Sinai and Joseph Gyourko, who used data for the U.S. 2000 Census and other sources to compute the subsidy per owner-occupied unit in each state in 1999.
Unevenness Soars
“ That subsidy ranged from a low of $2,240 in North Dakota to $12,759 in Hawaii. Among metropolitan areas the disparity was much greater: $26,385 in San Francisco-San Mateo-Redwood City, California, and a scant $1,541 in McAllen-Edinburg-Pharr along Texas's Mexican border. Some East Coast areas also had huge subsidies and many in states such as Tennessee, Ohio and Louisiana got little benefit.
“ Given what has happened to home prices on the two coasts since 1999, the unevenness of the value of the combined tax breaks has soared.
“ It's clear from the Wharton economists' study that the extremely rapid rise in home prices in some high-income markets and the subsidies, including the mortgage-interest deduction, feed on one another. Certainly the existence of the deduction encourages purchase of larger, more expensive homes.” --- It's Time to Drop the Home Mortgage Deduction: John M. Berry May 19 (Bloomberg) (http://www.newruskincollege.com/moynihanmemoriallibrarynewruskincollegecom/id20.html)
You can block us at every turn. Drive us into poverty. . . . Oppress us . . . How long beyond my death your reign of insults and viciousness will last, how long I do not know.
But I know that in the end you can not take it with you.
In the end you must sink down into the mud, and disappear under the reeds in the water, a bubble here and there, and then just the sunlight again on the surface, then only the swaying of the reeds in the breeze . . . the waves gently rocking them . . .
Whereas the attacks on the United States of September 11, 2001 underscored the gravity of the threat posed by the acquisition of weapons of mass destruction by international terrorist organizations; Whereas members of al Qaida, an organization bearing responsibility for attacks on the United States, its citizens, and interests, including the attacks that occurred on September 11, 2001, are known to be in Iraq; Whereas Iraq continues to aid and harbor other international terrorist organizations, including organizations that threaten the lives and safety of American citizens; Whereas the current Iraqi regime has demonstrated its capability and willingness to use weapons of mass destruction against other nations and its own people; Whereas the current Iraqi regime has demonstrated its continuing hostility toward, and willingness to attack, the United States, including by attempting in 1993 to assassinate former President Bush and by firing on many thousands of occasions on United States and Coalition Armed Forces engaged in enforcing the resolutions of the United Nations Security Council;
www.NewRuskinCollege.com
Lecture Notes: 07-01-05
Bubbles
Here is a very good article on global bubbles:
Global Analysis: The Trouble with Bubbles is that the Economy Suffers When They Pop
By Allister HeathThe Business, LondonRISMEDIA, June 29
http://www.rismedia.com/index.php/article/articleview/10818/1/1/
What is still missing in the analysis is the examination of the influence of government on the bubbles. The Fed is an arm of government but there are many other ways government has caused the bubble.
For example consider that the bubble is worst in the Blue States and weakest in the Red States where zoning and building codes are less restrictive. The Blue Cities of Boston, New York, Chicago and San Francisco have artificially restricted supply and have therefore amplified the bubble.
These cities are the very same cities which were identified by the economists Glaeser and Gyourko as being the most restrictive on the housing market in their study, (see paper no. 1948. Edward L. Glaeser and Joseph Gyourko The Impact of Zoning on Housing Affordability, link: ( http://post.economics.harvard.edu/hier/2002papers/2002list.html )).
But even more fundamentally what is still missing in the analysis of the bubble is the basic market dynamic. Everyone tries to escape the market. Everyone seeks to place themselves outside the demands of the competitive market place.
However, only the powerful are able to extricate themselves. Yes, the rich of course. And the trade unions to the extent that they are able: nowadays this means public employee unions and the few private companies which have large capital investments which are difficult to relocate overseas and are therefore vulnerable to union action.
Unfortunately it is impossible to gain anything more than a temporary respite from the market. For the market tells us not what people say they want but what they really want what they really think.
For people are horrible liars. Not that they do not lie well, they do, but that they lie all the time and often for no reason at all. They will say they wish you well but really they would just as soon you burn in hell.
The rich for example know that the cost of housing should be no more than the cost of land, plus construction, plus interest on the capital. But why settle for such banalities when, by controlling the state, one can then control the market, and then, exercising such sovereign control one can reap usurious profits, ransoms such as once were paid by shipwrecked princes and sultans, profits such as weighed down Cortez’s men and sank them to the bottom of lake Texcoco?
Plunder!
And the gold is still there at the bottom of the lake, under the foundations of Mexico City, for in the end you can not after all take it with you.
This is why bubbles burst.
You can manipulate, distort, twist the market but in the end the truth will out.
Gore Vidal likes to remind us that the Venetians maintained their corrupt brutal rule of Crete for 800 years. True. But not anymore!
You can manipulate the tax laws to favor owners at the expense of renters, (and do it in the name of Liberalism, for sure, claim you are trying to build a “kinder gentler America”, yeah , yeah, sham on).
You can usurp the People’s sovereign power and down zone, and down zone, down zone five times in the last three decades, and drive up the price of housing beyond the reach of the People. (The average home in the Bay Area is now four times higher than what an average worker in California can afford to pay. (And this ! . . . was what the Liberals did to the People!!))
“ . . . In general, higher-income households that can easily afford to own a house without such subsidies get the bulk of the benefits.
“ Last year the National Bureau of Economic Research published a paper by two Wharton School economists, Todd Sinai and Joseph Gyourko, who used data for the U.S. 2000 Census and other sources to compute the subsidy per owner-occupied unit in each state in 1999.
Unevenness Soars
“ That subsidy ranged from a low of $2,240 in North Dakota to $12,759 in Hawaii. Among metropolitan areas the disparity was much greater: $26,385 in San Francisco-San Mateo-Redwood City, California, and a scant $1,541 in McAllen-Edinburg-Pharr along Texas's Mexican border. Some East Coast areas also had huge subsidies and many in states such as Tennessee, Ohio and Louisiana got little benefit.
“ Given what has happened to home prices on the two coasts since 1999, the unevenness of the value of the combined tax breaks has soared.
“ It's clear from the Wharton economists' study that the extremely rapid rise in home prices in some high-income markets and the subsidies, including the mortgage-interest deduction, feed on one another. Certainly the existence of the deduction encourages purchase of larger, more expensive homes.” --- It's Time to Drop the Home Mortgage Deduction: John M. Berry May 19 (Bloomberg) (http://www.newruskincollege.com/moynihanmemoriallibrarynewruskincollegecom/id20.html)
You can block us at every turn. Drive us into poverty. . . . Oppress us . . . How long beyond my death your reign of insults and viciousness will last, how long I do not know.
But I know that in the end you can not take it with you.
In the end you must sink down into the mud, and disappear under the reeds in the water, a bubble here and there, and then just the sunlight again on the surface, then only the swaying of the reeds in the breeze . . . the waves gently rocking them . . .
Whereas the attacks on the United States of September 11, 2001 underscored the gravity of the threat posed by the acquisition of weapons of mass destruction by international terrorist organizations; Whereas members of al Qaida, an organization bearing responsibility for attacks on the United States, its citizens, and interests, including the attacks that occurred on September 11, 2001, are known to be in Iraq; Whereas Iraq continues to aid and harbor other international terrorist organizations, including organizations that threaten the lives and safety of American citizens; Whereas the current Iraqi regime has demonstrated its capability and willingness to use weapons of mass destruction against other nations and its own people; Whereas the current Iraqi regime has demonstrated its continuing hostility toward, and willingness to attack, the United States, including by attempting in 1993 to assassinate former President Bush and by firing on many thousands of occasions on United States and Coalition Armed Forces engaged in enforcing the resolutions of the United Nations Security Council;
www.NewRuskinCollege.com
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