Don’t Count on Housing Again

August 23, 2010 Leave a comment

Please see the excellent post in The Baseline Scenario (for my money one of the best economics and financial blogs around) where housing is evaluated as a bad personal investment.  The graph shows that housing values remained more or less flat for years in real terms (adjusted for inflation) and then we had the bubble and its collapse.

Friends of Coral Gables–Do not count on your house ever becoming again an ATM for you and the city (via higher taxes).  All future tax increases will come straight out of your pocket.

…I don’t think it’s correct to say that an era is over–an era when housing appreciation was the key to the economy. The chart above shows simply that that era never existed; housing was flat for a long time, and then there was a bubble. Instead, we had the illusion of an era of housing appreciation, produced mainly by leverage and price illusion. For every homeowner who made a killing because she got a fixed-rate mortgage in 1970, there was a new family that couldn’t afford a house in 1980 because interest rates were too high, or a savings and loan that failed because it was weighed down by those fixed-rate mortgages. That whole phenomenon was just a transfer of wealth within society.

via Housing in Ten Words « The Baseline Scenario.

Filed under Economy, Housing

Why the Japanese Economy has been Stagnant for 15 years: A Lesson for the US

August 20, 2010 Leave a comment

This presentation is long and somewhat technical but there are important ideas contained within that apply to the US economy.  Japan had a large reduction in real estate values after the real estate bubble burst , this led to 10 to 15 years of economic stagnation, interests rates were driven down to zero, private companies quit investing and just paid down debt, and the government responded by an off-and-on fiscal policy that caused the economy to go from slight growth and decline for more than a decade.

Main lesson:  Keep your pedal on the government spending or things will get worse when private investment has stopped. This lesson strongly applies to the US and suggests that we may be in for a very long period of slow growth and high unemployment if political leaders insist on paying down public debt instead of continuing to provide stimulus (so far too little).

Vodpod videos no longer available.

Filed under Economy

“Roadmap to Florida’s Future”: A Guide for the Future of Coral Gables?

August 19, 2010 Leave a comment

I have been reading through the “Roadmap to FLorida’s Future:  2010-2015 Strategic Plan for Economic Development”.  This provides an solid basis for thinking about new sectors, clusters and strategies for the growth of Florida and for regions that are able to think about their future.  I will be adding some additional comments on the roadmap one basis for the future of Coral Gables and South Florida.

Filed under Business and Commerce, Coral Gables, Economy

Robert Reich’s Recitation of First Year Economics

August 15, 2010 Leave a comment

Robert Reich’s view (he is a liberal economist) is a very simple one and it is contained in any principles of economics text–growth is still sluggish and unemployment is high; consumption is stagnant; business is not investing; and exports are not growing (we are not Germany).  The only remaining option is increased spending on effective jobs programs.  This will help Coral Gables and its businesses if you desire for more sales, trade, exports and demands for local services, and, eventually, even stable and slightly rising real estate values.

It’s nonsense to think of the economy heading downward again into a double dip when most Americans never emerged from the first dip. We’re still in one long Big Dipper.

via Robert Reich (Forget a Double Dip. We’re Still in One Long Big Dipper.).

Filed under Economy

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