[Grovenet] America's Trillion-Dollar Baby

[Ron D'Eau Claire]

David wrote:

In the short term, those unemployed workers would be on welfare and  
the merchants who support them would be extending credit.  Then when  
the bills push them to bankruptcy, the local economy crashes.

--------------------------------------

It's hardly a "local economy" David. There's no "Forest Grove" there where
those people live. They work from San Mateo to San Jose and drive 100 miles
and  more  to Stockton, Tracy and other towns in the central valley where
they have homes. 

But I specifically was  *not* talking about the people. They'd be long gone.
I asked, "...what happens to thousands and thousands of homes..." and I
apologize, I thought it was obvious that it was a rhetorical question. My
point was that those thousands and thousands of homes won't have buyers once
the idea of commuting 200+ miles/day is no longer attractive. So they sit
empty, as part of that 9% of unoccupied housing units the report mentioned.
There isn't enough local demand out in the central valley for that many
homes. There are no jobs that need that many workers. So they sit empty and
unusable by anyone. 

David wrote:

I would certainly hope that none of those (sub-prime) loans are guaranteed
by  
public money.

-----------------------------

I don't think so. As I explained, they are the direct result of private
investors lusting after those higher interest rates. The same greed and
absurd optimism that caused people to over-extend themselves on the hope
that the boom would continue indefinitely also lured the investors into
making the loans. 

Ron D'Eau Claire 

 


-----Original Message-----
From: grovenet-bounces at rdrop.com [mailto:grovenet-bounces at rdrop.com] On
Behalf Of David Morelli
Sent: Saturday, January 27, 2007 5:46 PM
To: Forest Grove local interests list
Subject: Re: [Grovenet] America's Trillion-Dollar Baby



On Jan 27, 2007, at 3:15 PM, Ron D'Eau Claire wrote:

>
> Is that sustainable? I don't think so. So what happens to thousands
> and thousands of homes in California's central valley of those  
> workers go away,
> as they might at any time if there's a stumble in employment around  
> San Francisco? You will have miles and miles of empty houses. That  
> happened in the 1970's in Houston when the oil bust struck there.  
> Whole townships filled by new, never-occupied homes were deserted.

In the short term, those unemployed workers would be on welfare and  
the merchants who support them would be extending credit.  Then when  
the bills push them to bankruptcy, the local economy crashes.
>
> This is where I start to sound like a "liberal" to my conservative
> friends, but I think the answer is more regulations. Sure, we can  
> always try to educate our kids better, but the bottom line is that  
> at some point it has to become impossible for the citizen to choose  
> certain options such as driving 100 miles each way to their jobs so  
> they can have a 3 br 2 bth ranch home instead of a city condo.

There are a number of free market approaches that could be used to  
satisfy your conservative friends.

Repeat of an earlier comment.  The international value of the dollar  
has been kept artificially high to keep import costs low.  Lower  
exchange rate means higher fuel cost with less incentive to commute  
200 miles per day.   Lower exchange rate means business can remain or  
expand within the United States, which means they could locate in  
places with surplus American labor, with local employment  
opportunities reduce the incentive for a 200 mile commute.

I would also guess that the 200 mile commute is creating real air  
pollution problems along the roads and at the refineries.  Better air  
quality regulations would raise the cost of refining fuel and  
operating vehicles which reduces the incentive for a 200 mile commute.

Reducing the public spending to expand the commute routes would  
increase commute times and reduce the commute incentive.  Refusal by  
public agencies to bankroll private projects or provide incentives  
would raise the cost of those projects.  Reducing the "eminent  
domain" actions that support public and private commuting would raise  
the cost of commuting.

Reducing public subsidies to commuting, using the police power of  
government to regulate pollution and the treasury authority of  
government to set the value of the dollar would work to ensure that  
the market gets honest pricing signals.  The free market works better  
when all of the signals are present in the selling price.
>
> We currently have another serious problem in housing that is
> growing rapidly: defaults. A lot of people grabbed "sub-prime"  
> loans when interest rates were very low and over-extended  
> themselves buying more property than they could afford. Now they  
> can't keep up the payments. Not too many years ago, less than 5% of  
> the loans written were sub-prime because banks and S&L's didn't  
> like to write high-risk loans. But then investors fell in love with  
> the high interest rates those loans returned and demanded more  
> opportunities to invest in sub-primes, so the mortgage companies  
> have complied. Over the past couple of years, that number has  
> jumped from 5% to 20% sub-prime loans.

I would certainly hope that none of those loans are guaranteed by  
public money.

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