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There is no escape from Solutions Cat
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Also went to take a panograph at the lighthouse of Cape Disappointment in Washington. This is the overview for orientation purposes. I have no...
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housing bubble - 7 found
Recession and the Recovery Problem
I’m sitting outside the auto repair shop waiting for the brake light switch on my aging Toyota Corolla to be fixed. I’m typing on the Nokia N97 smartphonne, on which I also have been reading news. I had blogged that the N97 would get a second chance. The iPhone 3GS is on ice, so to speak. But my N97 experience is topic for another post.
My topic here is the news I was reading in the New York Times about an analyst report suggesting that the economy is starting to recover. It’s not. But first, the Times asserts: “A measure of supplier deliveries, rising stock prices, an increase in consumer expectations, a jump in building permits and the ‘interest rate spread’ bolstered the index in August.”
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The China Question
Is the American era over? I’m beginning to wonder if the answer is yes. History is the reason. In 1914, the British Empire spanned the globe, and London was the financial capitol (eh, capital would work, too) of the world. Four years later, England’s fortunes had changed. The country had shifted much of its manufacturing production to the war and spent quite a bit of its capital supporting European allies. Meanwhile, the United States picked up manufacturing slack and monetary might. Could America’s fortunes change so quickly?
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Masters of the Econolypse
Rolling Stone issue 1099 arrived while I was flu-snookered last week. It’s the third issue received since my resubscribing after more than 25 years. Amazon made an offer I couldn’t refuse: Half-year subscription for a buck. The writing is better than ever, although a contributing editor wrote the best story—”Wall Street’s Bailout Hustle”. (If you see an illustration—meaning the link to it is still live—credit: Victor Juhasz.)
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Damn, I must read Chris Anderson’s book Free: The Past and Future of a Radical Price. Based on the above WNYC video and Q&A—”The Gift Economist“—in the July 19, 2009 the New York Times Magazine, I must disagree with Chris’ concept of free as applied to digital products. Free and the Internet go oddly together, and not necessarily well together. Chris may be right, but for other reasons than he presents here.
In the video above, Chris asserts that on the Internet “free really can be free.” Nobody has to pay. He presents his view, which does allow for combo free and paid models, by way of marketing and economic history and theory. My problem: Contrary to popular belief, economics doesn’t derive from human culture or society, but the natural world—where nothing is really free.
Air doesn’t cost you anything. It’s free; natural processes over billions of years paid for the atmosphere we freely take for granted. But the process of breathing isn’t free. It requires the proper functioning of interdependent biological systems and input of energy, provided by ingested food. Some food freely grows, but the majority must be cultivated, which price is paid for in many clearly identifiable ways I shouldn’t need explain; they’re obvious.
Then there is biology. Regardless of culture, society or civilization—past or present—human beings instinctively assign value to everything. Survival of species demands choices for which there is the greatest value derived for the invested energy. That’s biology, not society, as primary influencer. Mother Nature invented proverb: “Waste not, want not.”
Value is Everything
Modern economic theory is too hung up on prices, when value is more important. Often pricing is independent of value, as should be apparent from the housing market collapse. An artificial debt-driven bubble drove up home prices, which didn’t make the real estate more valuable.
A $5 million dollar condo in Manhattan might be valuable for location, not because a housing bubble drove up the price by $2 million. Now, housing prices are free falling in most US markets and will continue to until perceived value—mostly measured by people’s willingness and ability to buy—achieves equilibrium with mortgage costs.
Value is everything. For a teen the value assessment might be: Is it worth cleaning my room so my parents won’t yell at me or will I get more from chatting with my friends online? There is an associated value assigned to the action, but not an associated price. People make these kind of value decisions for most nearly every action the take, or decide not to.
In the late 1990s, I paid Netscape $30 bucks for its Web browser, even though Internet Explorer was free. Why? Because I got more value from paying than getting something for free. I’ve paid for the online version of the Wall Street Journal since 1996. Much of the same information is available elsewhere for free. But I derive value from the Journal’s authority, presentation, story searchability and cheaper cost (about half) the print edition. The point: People will pay for anything for which there is perceived or actual value. Free is an acceptable price when there is perceived or actual value.
The Value of Free
Where Chris might have a point—and I’ll need to read his book to find it: Human beings instinctively are natural communicators, and they expect communications—the exchange of information—to be free. Anthropologically, people have a need to create, share their creations and reciprocate the process to others.
I believe that people everywhere have a natural aversion to paying for information or entertainment. Just because communications and social sharing are highly valuable doesn’t mean people willingly pay for them. The idea that value has a price, whether fixed or fluid because of supply-and-demand logistics, is a construct of economic theory.
From that perspective, copyrights and patents are unnatural constructs. They restrict the natural creating, sharing and communications processes that are essential to human intelligence and its further development.
Google gives away for free information/content that people highly value. Internet free isn’t about price but making things free that people highly value but instinctively don’t want to pay for.
Damn, maybe I should write a book. If you’re a publisher, or book agent, please ping. I’m ready.
Do you have a story about value that you’d like told? Please email Joe Wilcox: oddlytogether at gmail dot com.
Reich’s Right: No Economic Recovery in Sight
U Cal Berkley prof Robert Reich astutely and concisely sums up the prospects for economic revival in commentary “When Will the Recovery Begin? Never.” I saw it today at Salon, but Robert posted to his blog on July 9.
Other economic observers who talk about a recovery underway go oddly together with reality. There is no recovery now, and there isn’t going to be one in the foreseeable future. I’m no economist. but even I can see what’s going on, as I did about the housing crisis four years ago. Why can’t other people? The housing crisis and current situation are linked in ways few so-called experts are identifying. But Robert clearly gets it.
He writes about two camps predicting recovery. One camp (V-shaped) looks to past recessions as roadmap for faster recovery. The other camp (U-shaped) recognizes how weakened are asset markets, and sees a slower recovery.
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Pop Goes the Housing Bubble
Last summer, my wife, daughter and I scoured the Washington suburb of Bowie for a house to buy. After a month of house hunting, we decided to stay put in our rental house, located in a nicer neighborhood and much closer to downtown Washington (We live off of Connecticut Ave. just three miles from the city.)
The decision not to buy came with great angst. Rising real estate prices made the potential equity gains look promising, and we were simply ready to be homeowners. But the math simply didn’t work. When factoring in taxes and insurance, our monthly mortgage would have approached $2,200, compared to our $1,100—starting this month, $1,200—rent. We couldn’t see how our quality of life would be better doubling our monthly housing payment, even factoring in potential equity gains or tax breaks.
Also, I considered every house we looked at to be overpriced, which led me to take a closer look at the U.S. housing market. Almost immediately, I concluded that a housing bubble had formed, which bore similarities to the dot-com stock bubble. Since our decision to stay renters, the bubble has only increased—and dangerously.
My take before discussing excellent stories in the Economist (last month) and the New York Times (two weeks ago): I see housing prices as being similar to stock value, as in the value can be—and often is—arbitrary, not necessarily reflective of real value. During the dot-com boom, shares on many Internet companies traded well beyond their real market capitalization. Runaway speculation drove up shares and led to dangerous trading practices. `Round Washington, household equity is strikingly similar in characteristic.
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Remembering Lennon
December 8, 1980, I was volunteer fundraising in New York City. I beat the street until late and beat to bed around midnight. I lived in a group house a few blocks south of Columbia University on the Upper West Side.
I crawled out of bed around 8:30 a.m. on the 9th, a Tuesday. I recall bouncing down the stairs, laughing as I moved along. In those days, I was skinny and bushy blonde and always bubbling optimism. To a fault. I drove people nuts with my energy and enthusiasm.
A good buddy, who was a real prankster, stared out into the street, a New York Post clutched in one hand and a cup of coffee in the other. He turned and in absolute monotone told me that someone shot John Lennon. I blinked. “He’s dead?” I naturally took it as a prank, even when he insisted. Then he handed me the morning Post, with its gruesome front page photo. Silence hung thick between us, and he turned his eyes back to the street. I joined him.
