Housing Bubble Correction Update: Here comes the jobs crash (Part I)

[marvenger]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

the US has the strongest military and the dollar is still the reserve currency so the US can still do whatever they want. But their lazy strategy of getting a free ride from the rest of the world can't go on forever as the rest of world builds it's capacity to supply cheap goods to the US eventually they'll develop their own demand and break free of US influence in their institutions and take more control of their own economies and the US will be in trouble. But I think it's still a way off.

[Chris Coles]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

the US has the strongest military and the dollar is still the reserve currency so the US can still do whatever they want. But their lazy strategy of getting a free ride from the rest of the world can't go on forever as the rest of world builds it's capacity to supply cheap goods to the US eventually they'll develop their own demand and break free of US influence in their institutions and take more control of their own economies and the US will be in trouble. But I think it's still a way off.

We can agree to differ. I believe the US is already well past the point of no return. If it follows the UK road, then you can be certain of the following five decades with your elite telling the world how great you still are, regardless of the truth. The hardest part is facing the reality of anything we say or do. You cannot change direction without facing the truth.

[touchring]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

Yes, if at the end of the wars oil remains valuable then you might say they have succeeded. But your argument completely vanishes if in the end, oil becomes worthless. In that case, the whole exercise will be seen as the greatest waste of any nations greatest resource, its own capacity to create industrial products for its own markets.

If oil becomes worthless, where do you get the funding for the re-establishment of your industrial base...... China?

How would oil become worthless?

The US is founded on cheap oil, without oil, how are people going to go to work?

[Chris Coles]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

How would oil become worthless?

The US is founded on cheap oil, without oil, how are people going to go to work?

The premier scientific magazine in the US has told you that the sea might rise a minimum of 20 feet. Suddenly!

Now go down and take a look at the dock where the oil arrives and imagine the sea "at Least" 20 feet higher......

It is not cheap oil when you cannot take delivery, as you cannot take it at all. In that case, when you cannot deliver, it becomes worthless because you cannot sell it because you cannot deliver.

Please, sit down and wrap a wet towel around your head and imagine every city beside the sea with the sea 20 feet above present high tide levels, suddenly.

Now you get it?

And then imagine that instead their worst case arrives, not 20 feet, but 170 feet. No, not my idea, but the best scientists you have. Listen to them.

You will not have oil, or cars or trucks. You will be back to the middle ages using the horse. Oil will be worthless and probably the wells will be as under water as the rest of us.

[FRED]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

The US has the strongest military and the dollar is still the reserve currency so the US can still do whatever they want. But their lazy strategy of getting a free ride from the rest of the world can't go on forever as the rest of world builds it's capacity to supply cheap goods to the US eventually they'll develop their own demand and break free of US influence in their institutions and take more control of their own economies and the US will be in trouble. But I think it's still a way off.

EJ writes in:

A second major shift in global wealth in 100 years is occurring. The first, a shift from Europe to the US, started around 1900 and peaked in the 1970s and the second, from the US and Europe to Asia, began. These processes are gradual. If you traveled from the US to Japan, China, and South Korea and also to Germany, France, and the UK every five years from 1980 to today, the high rate of economic development in Asia versus the US and Europe was obvious.

Here we represent the change in wealth by animating maps created by WorldMapper.org: "Territory size shows the proportion of worldwide Gross Domestic Product equalised in US$ in purchasing power parity that was produced there" in 1900, 1960, and projected to 2015.

[media="320, 300, 0, 0"]http://www.itulip.com/movies/wealth1900-2015.mp4[/media]
Wealth from 1900 to 1960 (Europe to USA)
and 1960 to 2015 (USA and Europe to Asia)
Data and maps from WorldMapper.com

The point of the animated map is to demonstrate how gradual these processes are, occurring over decades. Citizens in the "from" wealthiest countries experience these shifts through the series of crises that typically attend global wealth shifts.

"Asia’s rise is the economic event of our age. Should it proceed as it has over the last few decades, it will bring the two centuries of global domination by Europe and, subsequently, its giant North American offshoot to an end." - Martin Wolf, 2003

Why might the growth not proceed as it has over the last few decades? Political risks, peak cheap oil, other show stoppers? Topic for another thread in the future.

[c1ue]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

We can agree to differ. I believe the US is already well past the point of no return. If it follows the UK road, then you can be certain of the following five decades with your elite telling the world how great you still are, regardless of the truth. The hardest part is facing the reality of anything we say or do. You cannot change direction without facing the truth.

Chris,

There is a difference between the US and the UK, however: size.

For all my doom and gloom, I still recognize that the US is still one of the largest countries by population and area, and definitely the largest in wealth (at least right now).

The UK was able to project force via its colonies, and against nations which were of roughly similar size (France, Britain, etc)

No matter what, the US as a large nation will still have its place in the world's leadership - I just don't believe it will be as THE leader.

[bill]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

http://online.wsj.com/article/SB121796016250214003.html

Sovereign Good
August 6, 2008

(From the Wall Street Journal Asia)
We write in response to the letter "Do Pick on Sovereign Wealth" (July 23). As co-chairs of the Congressional Task Force on Sovereign Wealth, we agree on the need for greater transparency and intend to focus on that issue in key meetings in Europe and the Middle East this month. The leverage foreign governments could amass with Sovereign Wealth Funds (SWFs) is of serious concern, given that today, foreign governments finance 40 percent of the U.S. debt.
But we also believe the U.S. should proceed cautiously with any "one-size-fits-all" approach to governing SWF investment in the United States.
Since much of the tectonic shift of wealth to these funds is coming from our country to purchase oil and cheaper manufactured goods, we have, in effect, a critical stake in how "our" funds are reinvested.
We believe the International Monetary Fund is the most appropriate forum for addressing transparency and accountability in the near term. Strong arm tactics by our government can be counterproductive given the fact that SWFs can and will take their money elsewhere if the political risk premium for U.S. investment grows too high.
Sovereign wealth has played an enormous role in injecting capital into our financial institutions and economy in the wake of the subprime mortgage crisis. Citigroup, Merrill Lynch and other marquee names might have gone the way of IndyMac without the multi-billion-dollar infusions of cash over the past several months.
We also are apprehensive that a heavy-handed approach could result in reciprocal negative reactions, such as a shift away from the dollar to another currency, further weakening the greenback and driving up the price of oil.
Given the positive role SWFs have and can continue to play in our economy, we believe it is imperative to think carefully before creating barriers to the reinvestment of these funds.
Reps. James Moran (D., Va.)
and Thomas Davis (R., Va.)
Co-chairs
Congressional Working Group on Sovereign Wealth Funds
Washington

[Chris Coles]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

EJ writes in:

A second major shift in global wealth in 100 years is occurring. The first, a shift from Europe to the US, started around 1900 and peaked in the 1970s and the second, from the US and Europe to Asia, began. These processes are gradual. If you traveled from the US to Japan, China, and South Korea and also to Germany, France, and the UK every five years from 1980 to today, the high rate of economic development in Asia versus the US and Europe was obvious.

The point of the animated map is to demonstrate how gradual these processes are, occurring over decades.

What I have been trying to get across is very well illustrated by EJ above. Unless you have lived through it, you would indeed have real difficulty in seeing the decline from outside. It occurs so slowly, almost imperceptibly. But you do see it if you have your eyes open.

I well remember once standing on a railway station in the South of England when the topic came up as a conversation between travellers. Someone came out with "You do not realise just how Third World the UK has become until you come back from a Third World country".

We lost more of our industrial base during the Thatcher era than during WW2. We have got so far away from any understanding of how industry is created that not only our political leaders, but also almost the entire financial leadership came on board with the drastic inflation of house prices as the only way they could see to invigorate the economy. And now, even after we can all see the problems of continuing with that strategy, they cannot stop themselves. They are simply following along the same old road to disaster.

In the 1970's and 1980's the lack of long term investment in utilities became a standing joke. And I do mean a standing joke. So they all got privatised. But then we have had the same experience as Russia, only this time the French came in and bought the lot. Our utilities are owned by France. Now I have French family and I admire them. But please, you try living through all that and see the result of decades of a complete lack of understanding of the nature of investment needed to keep a nation on track and sufficient for its citizens.

Believe me, it is a devastating experience to watch a fine nation, YOUR nation, disintegrate in front of your eyes, slowly, like watching a log disintegrate with a fungus....

I am well reminded of a paper written by a Professor writing about the decline in the number of citations in science here in the UK, who showed me how he had ended the paper with the words, "And who cares?" And that was in the early 1980's.

They still do not care.

For those of you in the US who feel things are not so bad, I can only suggest you take a drive, outside of the financial centre, of almost any city in the nation. Try around the likes of Detroit. or, for that matter, take a train ride between your two main cities on the East coast, Washington and New York, but instead of reading your newspaper, just look out of the window. Oh! And remember, you will not be travelling at near 185 MPH as you would in Europe. Take a careful note of the age and repair state of the railway infrastructure.

Scrape the surface, open your eyes and see.

[jimmygu3]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

The premier scientific magazine in the US has told you that the sea might rise a minimum of 20 feet. Suddenly!

Now go down and take a look at the dock where the oil arrives and imagine the sea "at Least" 20 feet higher......

It is not cheap oil when you cannot take delivery, as you cannot take it at all. In that case, when you cannot deliver, it becomes worthless because you cannot sell it because you cannot deliver.

Please, sit down and wrap a wet towel around your head and imagine every city beside the sea with the sea 20 feet above present high tide levels, suddenly.

Now you get it?

And then imagine that instead their worst case arrives, not 20 feet, but 170 feet. No, not my idea, but the best scientists you have. Listen to them.

You will not have oil, or cars or trucks. You will be back to the middle ages using the horse. Oil will be worthless and probably the wells will be as under water as the rest of us.

Chris,

I appreciate the link to the article, and I always enjoy your posts.

I think you are 180° off with regards to oil being worthless in a rising-sea world. Imagine the Greenland ice shelf sliding off next summer, unleashing worldwide tsunamis and causing the sea levels to permanently rise 20 feet. It would create unthinkable damage and loss of life, but the other 99% of us will have to move forward, go to work and feed our families. This requires transportation, which generally requires oil.

We would quickly find makeshift ports (deep rivers near the coast maybe?) to deliver oil. If tankers can't dock, a whole new industry of "oil tenders" will spring up to transfer cargo from anchored ships to smaller vessels that can make it to port. The result would be a massive increase in the price of oil. Peak Cheap Oil on steroids. Other essential imports would behave similarly.

I know you feel like the 200 ft rise would be the end of the world, as it would be devastating to Britain, but life would go on in that case, as well. People fleeing flooded cities would flock to cities on higher ground, bidding up the price of real estate like never before. :eek:

You're right that many would have to opt for a horse and buggy, but not because oil is worthless, but rather priceless. OK, maybe not exactly priceless, but it sounded good.

Jimmygu3
Atlanta, GA (elevation 1000 ft, and loving it!);)

[Chris Coles]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

Jimmy,

You are quite correct and I am put squarely in my place, I should have used the word "Priceless" instead of worthless. Many thanks for pointing that out to me.

But you still miss the main point, the "oil" you talk about has to be refined and it will be the refineries that have not been replaced since they were first built in the 1950's and 1960's that, when underwater, are worthless. And, moreover, it takes some years to plan and build a new one, which is one of the principle reasons why there have not been any new ones built for some years now in the US, (for example).

No refining capacity and the raw crude oil becomes ?

What is the correct word for a priceless unusable commodity?

Chris.

[tombat1913]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

For all my doom and gloom, I still recognize that the US is still one of the largest countries by population and area, and definitely the largest in wealth (at least right now).

Perhaps I'm wrong but it seems more like an illusion of wealth. Economic trickery to push from one bubble to the next as any true wealth leaches out of our hands. The governments own ex-accountant Comptroller General Walker quit his post to inform the public of this on a full time basis. We're broke.

If I took out loans and credit cards and bought some bling and rims I'd look damn wealthy too! Still an illusion all the same.

[touchring]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

For all my doom and gloom, I still recognize that the US is still one of the largest countries by population and area, and definitely the largest in wealth (at least right now).

The US government can impose a one-time 10%-40% living wealth tax on all millionaire americans to pay off the federal debt (including fannie and freddie). So billionaires like Bill gates and warren buffet will need to fork out $25 billion each.

[c1ue]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

Perhaps I'm wrong but it seems more like an illusion of wealth. Economic trickery to push from one bubble to the next as any true wealth leaches out of our hands. The governments own ex-accountant Comptroller General Walker quit his post to inform the public of this on a full time basis. We're broke.

Tom,

Certainly some of the present wealth is illusory, but not all of it.

Despite its present shape - the infrastructure in the US is still far superior to most nations of the world.

Between roads, sewage plants, hospitals, dams, bridges, etc there is still a lot of economic benefits to being an American.

Then there are the accumulated savings. There is still a lot of cash - even outside the top 5%. While it is being eroded by inflation, we're not Zimbabwe (at least, so far). That money can still do something.

For all my 'down on the USA' talk, I still view a possible future as the US being temporarily pushed down to Poland status in the grand scheme. But still the 4th largest nation in the world - France, Germany, and Russia all had their bad days as well but size eventually does matter.

[Paulemtg]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

The housing bubble is now popped, but an interesting and predictable trend has begun again, treasuries are a desired investment. With the world economies in decline, there really isn't a single viable alternative at par with a US Treasury debt instrument. Thats why the dollar is becoming stronger...thats going to lead to more cash, and dare I say it, the rapid decline in home purchasing will moderate, but prices will continue to fall. Now with out question there is a lot of activity by investors picking up properties, and many actually think that its a good investment. They are most likely wrong, as prices will continue to fall. With Freddie Mac, and Fannie on the verge of BK, FDIC is getting ready to take over. You can be assured that they will move bad debt, and modifiy loans quickly, and without much feeling for the investor. That will drop prices like a rock in most urban markets, but there is a silver linning, we will begind to see a bottom, and a recovery will begin, although it may be moderate. 5 years for a complete cycle? Hmm maybe, but I've noticed over the last 40 years that markets react to reality, and move towards equilibrium. 2 to 3 years of adjustment is the more likely scenario.;)

[FRED]

Re: Housing Bubble Correction Update: Here comes the jobs crash (Part I)

The housing bubble is now popped, but an interesting and predictable trend has begun again, treasuries are a desired investment. With the world economies in decline, there really isn't a single viable alternative at par with a US Treasury debt instrument. Thats why the dollar is becoming stronger...thats going to lead to more cash, and dare I say it, the rapid decline in home purchasing will moderate, but prices will continue to fall. Now with out question there is a lot of activity by investors picking up properties, and many actually think that its a good investment. They are most likely wrong, as prices will continue to fall. With Freddie Mac, and Fannie on the verge of BK, FDIC is getting ready to take over. You can be assured that they will move bad debt, and modifiy loans quickly, and without much feeling for the investor. That will drop prices like a rock in most urban markets, but there is a silver linning, we will begind to see a bottom, and a recovery will begin, although it may be moderate. 5 years for a complete cycle? Hmm maybe, but I've noticed over the last 40 years that markets react to reality, and move towards equilibrium. 2 to 3 years of adjustment is the more likely scenario.;)

Good points and welcome. For long term iTulip forecasts goggle "housing bubble correction"