Suburbia Über Nada
Aug. 8th, 2009 10:44 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peristaltorJim Kunstler whipped out another gem in which he wrote:
Why is he so glum about our economic expansion? Simply put, the 'burbs were literally fueled by cheap energy. People "drove until they qualified" -- bought houses further and further from their workplaces, schools and towns, and relied upon their cars to get them to and from. Well folks, think back to the great economic collapse of last year. In November, the banks skidded near the edge of the financial cliff -- some went over it, like Lehman Bros.; but the average person on the street didn't start to see troubles . . . until gas went over $3.50 a gallon. That's when the economy hit home.
We've been through these troubles before, during the OPEC years. I remember well the articles talking about this new phenomenon of "stagflation," where incomes stagnate and the cost of everything rises anyway. Why did this happen? According to the thinkers of the time, it was due to "entitlements" that didn't reflect the amount of money people actually paid in taxes. Wrong. This thinker in particular did what all thinkers do; he projected his hatred of people getting money promised them for no work on a larger economic reality he didn't understand.
What he missed was the amazingly important role fuel provided then and now. Everything we eat, wear, and use is largely -- very largely -- produced for us and brought to us with help from machines that eat fuel. Raise the cost of that fuel -- not the price, mind you, the inflation-adjusted cost in real dollars -- and the cost of living goes just as high.
This graphic (from this site) might help sum up the situation a little bit better.
For some perspective, the mainland US supply of crude peaked -- just as M. King Hubbert predicted -- in the early '70s. Drill as they might, the producers could not increase the crude supply, and were forced to start importing. This explains the increase in the mid-'70s, as more and more fuel came from the Middle East. OPEC producers, though, saw their opportunity and turned down the taps in '73. I lived through that period -- it wasn't pretty.
The Alaska pipeline started flowing in '77. The North Sea offshore fields ramped up production as the price rose, especially after '81. This largely caused the glut that lead to OPEC's weakening influence and the price collapse after '81. Everyone credited Reagan for this return to prosperity, for the price of gas didn't really fall that much. It simply stabilized for decades, allowing inflation to rise around it.
There were some spikes, of course. The increase in '90 should be self-explanatory. Note the one in '87, one that corresponds with Black Monday. When one's investments start to plummet in value, investors pull them and dump them into fuel futures, causing spikes in fuel prices.
(Funny story -- that heavy spike in price last summer? According to Ellen Brown in a C-Realm interview with![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
kmo, the banks may have colluded to snatch up those fuel futures last year in order to break the economies in the Middle East by saddling them with oppressive debt. Dubai especially went heavily into debt to build its wonder cities, all funded on the promise of sustained high crude prices that collapsed with the US economy. It's hearsay and based upon a source I can't substantiate, but I kinda like the story, one Ellen claims to have heard before the price surge. I recommend a listen.)
So where are we now? As Jim Kunstler says, screwed. We drove until we qualified, and now many of us are underwater or upside-down on the mortgage and haven't the cash to drive to a new job, let alone pay the credit card bills that funded the rainy days that haven't stopped. I have to agree with him on one thing: This recession isn't over, no matter what Newsweek or the "mendacious cretins at CNBC" might say. Banks have a lot of adjustable mortgages to reset. They spent the last year postponing those increases just to staunch the foreclosure bleeding, true; but they probably won't give up on all that extra interest forever. Once they do, we're back in the shit.
Watch home values continue to rise or stabilize in urban neighborhoods, especially ones with generally good economic activity and good mass transit. Watch home values out in the 'burbs continue to plummet. Kunstler predicts the suburbs will become the new slums. It's a reasonable prediction.
Addendum, August 10, 2009: Calculated Risk shares a paper describing a move from expanded building from city cores to a "new era of infill and redevelopment." Which will have to happen if "this monumentally unwise investment" called suburbia is ever to be corrected.
For decades we measured the health of our economy (and therefore of our society) by the number of "housing starts" recorded month-to-month. For decades, this translated into the number of suburban tract houses being built in the asteroid belts of our towns and cities. When housing starts were up, the simple-minded declared that things were good; when down, bad. What this view failed to consider was that all these suburban houses added up to a living arrangement with no future. That's what we were so busy actually doing. Which is why I refer to this monumentally unwise investment as the greatest misallocation of resources in the history of the world.
(Emphasis from the author.)
Why is he so glum about our economic expansion? Simply put, the 'burbs were literally fueled by cheap energy. People "drove until they qualified" -- bought houses further and further from their workplaces, schools and towns, and relied upon their cars to get them to and from. Well folks, think back to the great economic collapse of last year. In November, the banks skidded near the edge of the financial cliff -- some went over it, like Lehman Bros.; but the average person on the street didn't start to see troubles . . . until gas went over $3.50 a gallon. That's when the economy hit home.
We've been through these troubles before, during the OPEC years. I remember well the articles talking about this new phenomenon of "stagflation," where incomes stagnate and the cost of everything rises anyway. Why did this happen? According to the thinkers of the time, it was due to "entitlements" that didn't reflect the amount of money people actually paid in taxes. Wrong. This thinker in particular did what all thinkers do; he projected his hatred of people getting money promised them for no work on a larger economic reality he didn't understand.
What he missed was the amazingly important role fuel provided then and now. Everything we eat, wear, and use is largely -- very largely -- produced for us and brought to us with help from machines that eat fuel. Raise the cost of that fuel -- not the price, mind you, the inflation-adjusted cost in real dollars -- and the cost of living goes just as high.
This graphic (from this site) might help sum up the situation a little bit better.
For some perspective, the mainland US supply of crude peaked -- just as M. King Hubbert predicted -- in the early '70s. Drill as they might, the producers could not increase the crude supply, and were forced to start importing. This explains the increase in the mid-'70s, as more and more fuel came from the Middle East. OPEC producers, though, saw their opportunity and turned down the taps in '73. I lived through that period -- it wasn't pretty.
The Alaska pipeline started flowing in '77. The North Sea offshore fields ramped up production as the price rose, especially after '81. This largely caused the glut that lead to OPEC's weakening influence and the price collapse after '81. Everyone credited Reagan for this return to prosperity, for the price of gas didn't really fall that much. It simply stabilized for decades, allowing inflation to rise around it.
There were some spikes, of course. The increase in '90 should be self-explanatory. Note the one in '87, one that corresponds with Black Monday. When one's investments start to plummet in value, investors pull them and dump them into fuel futures, causing spikes in fuel prices.
(Funny story -- that heavy spike in price last summer? According to Ellen Brown in a C-Realm interview with
kmo, the banks may have colluded to snatch up those fuel futures last year in order to break the economies in the Middle East by saddling them with oppressive debt. Dubai especially went heavily into debt to build its wonder cities, all funded on the promise of sustained high crude prices that collapsed with the US economy. It's hearsay and based upon a source I can't substantiate, but I kinda like the story, one Ellen claims to have heard before the price surge. I recommend a listen.)So where are we now? As Jim Kunstler says, screwed. We drove until we qualified, and now many of us are underwater or upside-down on the mortgage and haven't the cash to drive to a new job, let alone pay the credit card bills that funded the rainy days that haven't stopped. I have to agree with him on one thing: This recession isn't over, no matter what Newsweek or the "mendacious cretins at CNBC" might say. Banks have a lot of adjustable mortgages to reset. They spent the last year postponing those increases just to staunch the foreclosure bleeding, true; but they probably won't give up on all that extra interest forever. Once they do, we're back in the shit.
Watch home values continue to rise or stabilize in urban neighborhoods, especially ones with generally good economic activity and good mass transit. Watch home values out in the 'burbs continue to plummet. Kunstler predicts the suburbs will become the new slums. It's a reasonable prediction.
Addendum, August 10, 2009: Calculated Risk shares a paper describing a move from expanded building from city cores to a "new era of infill and redevelopment." Which will have to happen if "this monumentally unwise investment" called suburbia is ever to be corrected.