A Modest Proposal. (No, really.)

So, the right wingers are having fun with the latest news of porn-dudes Flynt and Francis claiming to be preparing to go to Congress to ask for a bailout.

But what strikes me is, well, this is all taxpayer (i.e., your and my) money, so why not go to some pure democracy here? That is, why not have every industry that wants a bailout set up a fund, and have the people who want to bail out that industry chip in to save it?

There are 200 million households in America, approximately. $100 from each of us is $20B, which is about what we gave the auto industry. Though, you know, nobody asked if we wanted to. And it’ll cost a lot more once you figure in the interest.

AIG got $400 from each of us, I think. Obama’s stimulus plan will cost us probably $5K-$10K a year, every year, for the rest of our lives. And then our children’s lives.

This is pretty immoral. Our ancestors sacrificed mightily to create this great nation for us and our contribution to it will be to force our descendents to sacrifice for us as well.

The only addendum I’d make to my original tax plan is to add: No deficit spending. (At least, no long term deficit spending.) But that’s not so much about taxes and more about budgeting.

Once I Built A Railroad

So, this guy argues that the economy is worse off than we know, and shows how the various stats have been fudged over the years.

I think there’s a lot of truth to that, but isn’t the economy what we think it is, ultimately? I mean, there’s a little bit of black magic there that what we think about it determines how we act which has actual effect which tends to reinforce what we think.

Some theorize that, for example, the constant negative drumbeat of the press during a Republican administration results in actual economic suppression. (The good thing about a Dem winning the election is that all our economic news will have a positive spin and all our wars will become just.)

But, for example, removing food and energy from the inflation index is something I have mixed feelings about. At some point it matters but, for example, we didn’t have 100% inflation because fuel prices doubled, and we didn’t have 50% deflation because they’ve now dropped. I realize it’s only one factor, but I can see why it would skew things unreasonably.

Actually, if you were really going to measure inflation in an important way, you’d measure based on how it actually affected people. You know, take a person’s actual daily/weekly/monthly costs and compare those items, put them in a sample that reflected the composition of the country, and that people could drill down to see what it is for their particular bracket.

Then when yacht prices went through the roof, we could see that rampant inflation was affecting only the very wealthy.

Then there’s this allergy to deflation. I realize deflation is bad if you’re in debt, but it seems to me that deflation ought to be part of financial cycles just as much as inflation. I mean, a roughly stable currency seems like a good thing to me, but I could be wrong. Certainly, that’s not popular thought.

I dunno. It’s a lot nicer thinking that we have record unemployment lows than the numbers are just being fudged–but they do that in all the socialist states as well, to avoid the awful truth, so maybe we should try to keep our noses clean.

Honesty

Oh, honesty
Honesty
Ooh, it’s such a waste of energy
No, you don’t have to lie to me
Just give me some tenderness
Beneath your honesty
–Paul Simon, “Tenderness”

Lovely singer at that link, though I think the arrangement is not quite canonical.

I didn’t expect my post-apocalyptic stuff to be prophetic, but as we sit here on what some say is the brink of ruin THE LIKES OF WHICH HAVE NEVER BEEN SEEN, a little honesty might be in order.

The short form is this: Two things got us into this current financial predicament. Stupidity and evil. You can say “greed”, but greed is one or the other and usually both.

There was nothing unpredictable about it. I called it years ago, when my little hovel here doubled, then tripled, then quadrupled in value. (I “underbought” at the time. I was making in a year what my house went for! Underbuying has served me well.) Salaries stayed flat over most of that time period, so it seemed impossible to me that this state of affairs could continue.

As long as we concentrate all our power into the hands of a few people, we are subject to their failings.

Honesty in the current crisis–and by the way, this goes for 9/11, the ‘29 crash, and the New Deal–would be this, “We don’t know what we’re doing. We screwed this up without meaning to. At least most of us didn’t mean to. If we’re lucky, we’re smart enough to fix this. But in any event, we shouldn’t be trusted with this incredible amount of power in the future.”

You’ll see that there are many whose response to this highly regulated market failing is, “No! The problem is that not enough power is concnetrated in the hands of the people who screwed things up in the first place!” They won’t phrase it like that, of course. They’ll blame The Other Guys™ and insist that their own team was on the right side all along.

“As long as we get rid of The Other Guys–O! if only we’d gotten rid of The Other Guys sooner!–it’s not only okay for Our Guys to run everything, it’s the best way to go.”

Personally, I don’t know what the answer is for the immediate problem, nor even if there is an immediate problem that should be addressed. But I do know, with complete confidence, that going forward it would be best if we resisted the urge to allow any Guys (“Ours” or “Theirs”) to have that much power.

I don’t expect to be heard on this, mind you. But as our friend Paul Simon once wrote, “The words of the prophets are written on the subway walls and blogway halls.”

“Real” Wealth

As a native Southern Californian, I know more about real estate than any normal person should. But I’ve seen three boom-bust cycles in my life and lived in five different houses before I was 20. Real estate prices have always gone up over time–though I’ve read enough Megan McArdle to know that she thinks the prices are going to go down as the boomers move into retirement homes. (I suspect we’ll open the borders pretty wide before anything like that happens.)

Those who have been around longer than I have assured me that the boom-bust recycle predates my corporeal presence.

The first time it really hit home for me was when I was looking to get out of the renting game. I was fairly young and making good money, considering my age and financial footprint. But there was nothing on the market for less than $200,000 except for a few meager condos. Out of the question. I wasn’t going to pay that for an apartment that somehow fit a legal definition that allowed it to be called something else.

Well, then came the bust part of the cycle, and an earthquake, and a few years later, houses are going in the mid-to-low-100s and, and you could even get a castle with some nice land for $600K. This coincided pretty nicely with the tech bubble, allowing me to purchase a modest home at a reasonable price.

Now, the cycle always leaves prices higher than before so, just as with the stock market, if you’re in it for the long haul, you can always come out ahead. A buddy of mine bought a house recently at near peak prices–just as the market was falling–and it will be years before the market returns his value but he didn’t buy it as an investment, he bought it as a home. (Even so, there will be another spike that pushes the house up past what he paid for it long before it’s, you know, actually worth that.)

So, watching my own house quadruple in value, something like this doesn’t surprise me. In fact, I basically expect prices to drop to something higher than what I paid ten years ago. Maybe 40-50% higher. Which is still 40% of what it was going for at its height.

I have been expecting this to happen no sooner than early next year, after the next Pres takes office, barring an earthquake, but it might happen sooner. Right now I’ve been trying to refinance to a ridiculously low interest rate, but I’m racing against falling housing prices.

I’m guessing they’ll stay bottomed out for 2-3 years. Now all I need is another tech bubble.