Traveling GDAEman

Enjoying a respite and family time as I travel in the San Francisco Bay Area, my old stomping grounds. I've let the 24-hour news cycle pass me by for a change, but will be right back on top of the GDAE Podcast upon my return... that is, if I don't partake in a long weekend beach trip :-1

A couple thoughts have crossed my mind while traveling. One is a reflection on a segment by Fair and Accuracy in Reporting (FAIR) on media coverage of the on-going efforts to "reform" our anemic health care system. The commentary observed that reporters were saying, "The health care debate is so complex and nuanced that it is very difficult to cover and explain to the public." My gut reaction to that was, "It wouldn't be so complex if we had a single-payer system."

Another unrelated thought I had was a reflection on the SF Bay Area in which I grew up. It has changed so much, with many wealthy foreign people beginning to dominate the population in a place that is now nearly unaffordable to meager mortal (like myself). What happened?

Back in the early 1980s a referendum, Proposition 13, was passed based on short-term thinking and a fair amount of misinformation from the corporate quarters. It placed limits on property taxes, which on the surface sounds great. The most direct negative effect was the demise of the State's excellent public school system. A more subtle effect was the following.

Controls on property taxes made it possible for housing prices to inflate drastically, in part because there was little impact on existing home owners. Traditional property tax policies would have put the breaks on the outrageous home price increases. Once the housing prices got inflated, there was no way to reverse the Proposition 13 policy, because the taxes would have been unbearable. Prop 13 created an irreversible trap.

Because of the cost of a home, families like mine that had been in the Bay Area began feeling pressure to split up. Kids couldn't afford to buy a decent house here, so they had to move away. However, the most wealthy foreigners could afford the prices. As a result, the composition of the Bay Area has change irreversibly.

My parents and I, having left the Bay Area temporarily, cannot afford to return to live near my siblings, unless we want to live in a shoe box. This is a profound unintended consequence of the short-term thinking of Proposition 13.

Enough musing for now. It's time to enjoy my brief time here in sunny CA.

Economy: A Mess

Stocks plummet after retail, unemployment data

3% drop is big. Watch it swing right back up. Such swings have typically preceded past major economic crashes.... kinda like the nasty wobble before wipe-out, the bright light bulb before burn out, and the wild energy of a fly before death.

Jobless claims jump is bad omen for economy.

"Omen"? It's been a year since the big mortgage melt-dwon, and their still talking about omens for the future?

U.S. House Price Decline Could Be Worse Than Great Depression.

The higher the price, the further it has to fall. Raise your hand if you've heard a friend say, "If I had to buy my house now, I couldn't afford it." A modest house and a solid middle-class income... some speculators got rich and we're paying for it. But don't worry, the free market always corrects itself.

I was a little surprised by the date of a past article of mine. Remember the August 2007 real estate melt-down? Here's what I wrote in May 28, 2007:

Watch the real estate situation unravel this summer. Congress will try to save it, placing the burden on future tax-payers (so much for a "free" market in which bad business decisions are allowed to play out). We've seen it before in the same way the S&L double-scandal was swept under the rug. The twin debts will grow. Eventually, foreigners will diversify out of dollars, more so than they are already, and the US will decline like Spain and Britain did. The "hope" is that the US will do so with grace rather than a holocaust.

Photo Credit: "mess" by skepticillusion.

Then and Now: Bush on How to Handle Oil Prices

On Jan. 26, 2000, during a presidential debate, Bush opposed taking oil from the Strategic Petroleum Reserve and instead said then-President Clinton should "jawbone" oil producing nations. That week crude oil prices were $28 a barrel.

Today, prices are $127 a barrel. That's a 500% increase since Bush took office. Goldman Sachs predicts oil at $200 a barrel possibly within a year. Bush tried to "jawbone" Saudi Arabia, again, into increasing production. They effectively said, "no." [More]

Sources:

Associate Press, Bush fails to win Saudi help on gas prices, TERENCE HUNT, AP White House Correspondent.

Price Changes in Baltimore-Washington Area

Consumer Price Changes March 2008

Source:

US Department of Labor