Typical Lax Dad wrote: ↑Tue Jul 07, 2020 11:09 pm
All the gains made by labor are slowly being undone. The result the hollowing out of the working and lower middle calls. Where are all the nice working class neighborhoods with home ownership? There were plenty in the. 1960s / 1970s and into the 1980’s. Reagan led the charge for the war on labor. Now you can make $15.00 an hour working. But hey you can make it up in your 401k.
That’s one problem, as is expansion of Fannie/Freddie/Hud. There’s a lot of reasons for it. We don’t have health care portability but have a tax code that ties it to employers through company but not individual deductibility.
I don’t think CU’s knee-jerk response is appropriate or applies to what I’m talking about. I wrote that it didn’t mean no government involvement, but that’s a far cry from running up corn prices and false hopes of Rejuvenation in Iowa and cornbelt states with the well intentioned Ethanol mandate Bush installed. Wrote a white paper on it for the parent HQ of my German bank in Frankfurt so we could get approval in 05 (which is late to the party, I was young and fresh out of bschool and asked for a $400mm allocation which he promptly asked me to reduce to $100mm) and looked at nearly 30yrs of corn price data as there’s a naked/non correlated relationship between input of corn and output of ethanol (.02) while the nat gas fired plant was almost perfectly tied to ethanol due to a $0.51 tax credit (about $0.45 went through) and corn had ranged from 1978-2005 from like $0.80/bushel to a little over $3.00/bushel. Communities in the Midwest wrote stories about how it would save them having this new plant even though I had an appendix chart showing production capacity was going to blow through the floor mandate aggregate total in around two years. Also learned that Brazil ran E85 effectively and cheap on sugar cane but we couldn’t because of tariffs on Brazilian sugar that protected Florida, Louisiana and Texas (less of the last one). That was two government interventions that created the ethanol monster which is energy net inefficient and within two years corn ran up to $7/bushel.
The first bank bailout was in 1983, Continental Illinois. Now we have way more moral hazard due to this combined with FDIC insurance. Home price appreciation has skyrocketed since the 1980s-1990s when one could start buying with very little down payment (Agency/GSE mortgage securitization, due to the implicit govt guarantee for the agencies) and since has taken all the juice out of equity growth in homes. Case in point, my father in laws first house in a nice suburb they bought in 1984 for around $90k and sold in 1993 for nearly $450k. Not quite a five bagger on actual number slightly round (like less than $3k on each side). I bought our home in a nice part of Atlanta in 2013 for $530k, $5k less than the sellers bought it for in 2008 and while it’s not being sold until my body is dragged out of here, is worth maybe low $8s (great leveraged return on my 20% down payment) in seven years but would need to go to over $2mm to be a similar growth level in the next two years (ignoring that it was effectively flat from 08-2013). Why is a home in Binghamton, even if properly maintained, at best worth 25% more than it was in the late 1980s? Job losses and frankly a property tax rate thats above 4% of assessed value due to shrinking population and fixed costs they can’t/or won’t reduce so instead sell out to SUNY Binghamton giving up more land on property tax rolls for the short term benefit of the school putting some satellite campus buildings up downtown which only increases the burden on everyone else. There’s amazing Victorians that can’t clear $250k there because they are in SALT territory well north of $10k and higher than my home in Atlanta is taxed. As I’m close to completely removed so as to have no dog in that area I don’t care that much but would like to see it regain its long gone past but with the taxes and weak infrastructure it won’t happen, will continue to shrink until it’s just a college town of 20,000-30,000 residents.
Then LTC, I have mixed opinions on the repeal of glass steagall but certainly Wall Street moving from partnership capital owned to public equity turned the bigger shops into product factory’s vs intermediaries.
I refer to him often but Talib’s book antifragile has me convinced that a large part of the problem is we are trying to let/have the govt take all risk out of our lives which creates larger fractures when they come (financial crisis was inconceivable to anyone over 40, every street expert but the level of bailout and government intervention rose dramatically in the 1980s and 1990s which can’t be ignored.
True that the conversion from defined benefit to defined contribution has hurt many, but I’ve yet to see or be sustainable. How many of the “Nifty 50” from the 1970s even exist today?
But pensions aside because again to expect them to be fully funded when lives have continued to increase, the gift hasn’t fully funded future SSI obligations it’s a present value math game, are tied to businesses that may not last long enough, it becomes a last if first f’ed game.
I tend to think home price appreciation and leverage in the housing market has been a large part of the decline of the middle class. That’s an area dominated by government when you consider over 90% of mortgages are insured, we spent what $100bn+ bailing Fan/Fred out and HUD insurance premiums has never covered the losses, why not just cut a check for down payment assistance like my father in law should do for my brother in law vs just pretending he’s working, lose money on a business so he can have a job and pay for his house and life (the house is the brother in laws, he just has a forgivable loan...)
Wrote somewhere else, unions often served many good purposes a long time ago, using baseball big difference between Marvin Miller and Donald Fehr. Political economy teaches us that all institutions (govt, church, unions) become about their own existence and dialectic power not about the original intent or cause served. Didn’t FDR argue against civil service unions? Has government bothered to ensure us against monopoly power? Every business is heading towards a oligopoly, Silicon Valley’s entire ethos is about market share to be so dominant as to crowd out competitors who now create new businesses just to exit via sale to the big boy(s) rather than to build something to last because antitrust regulators have sucked for 40yrs.
We don’t get proper oversight and regulation, we get politically attractive actions. Because the government/politicians, and even the civil servants and their merit system, rewards doing the superficial. Maybe if we had a parliamentary system or some meaningful change in government organization that altered their incentive system but as our political organization goes today I don’t see replacing a lot of market driven policies with politically motivated ones as superior. That doesn’t mean Upton Sinclair is useless, I still hold a grudge against cops because the one beat his dog to death and really love my dogs (well one is left the other passed two years ago), but the simple problems were handled a long time ago and we kept layering on more and more solely from what I can tell for the benefit of politicians and government employees to show they were “in action” regardless of the outcomes.
