The reinvention of scarcity

Tempted though I am to reproduce the essay in full, Tony Curzon Price, incoming CEO of openDemocracy, has a very … thought-provoking article up, dealing with the issue, and effects, of web-publishing under Creative Commons.

It is very, very interesting, and you ought to head along and read it.

When does a housing slump become a bust?

From the IHT:

In the stock market, we have a pretty good idea what a crash is. Among stock market experts, there is a consensus that a 10 percent decline in a major index is a correction while a 20 percent decline is more significant: a crash or a bear market, depending on the time involved.

For the macroeconomy, there is also agreed-upon terminology. For example, a recession means two consecutive quarters of declining gross domestic product.

But when it comes to declines in housing prices, there is no such framework. As experts debate whether we are headed for a housing bust, you would think that we should at least be able to define it.

I wouldn’t say something as vague as 10% and 20% point to definitions. Not with economists, anyway.

The author (Anna Bernasek) goes on,

More recently, there have been severe price declines in regional markets. The most severe was in the so-called oil patch during the 1980s. In the late 1970s, as global oil prices soared, oil-producing areas of Texas, Oklahoma, Louisiana, Colorado, Wyoming and Alaska experienced an economic boom. As oil prices collapsed in the early 1980s, those economies crashed, and housing along with them.

In the worst cases, nominal home prices fell 40 percent in Lafayette, Louisiana, and 33 percent in Casper, Wyoming, from 1983 to 1988, according to the Office of Federal Housing Enterprise Oversight. In Houston, prices fell 22 percent.

There were also sharp price declines in housing on both coasts during the early 1990s. At that time, a series of events, including the recession of 1990-91, the military downsizing after the Cold War and a commercial real estate collapse, led to a housing downturn.

She’s right: houses aren’t safe as themselves for nothing. As she also discusses, the decline in house prices isn’t distributed evenly through a macroeconomy, because a macroeconomy is nothing more than an aggregate of microeconomies. A national average of house prices doesn’t care that military bases are in dedicated, small areas. State-based averages will. The anecdotes above demonstrate this, but they also demonstrate something she did not mention in her article.

All of these significant declines in house prices followed (or at least corresponded to) exogenous economic shocks (oil prices, military downsizing – and how’s that working out, Mr. Rumsfeld?), or a recession.

This government, with its tax cuts for the rich, has managed to beat the definition of a recession, but you don’t need to be a Paul Krugman fan to have heard the words “jobless recovery” used as a popular macroeconomic adjective in the last few years. The reason, I believe, why the slump/crash issue exists here is that it doesn’t. This is a weird sort of economy, one that hasn’t been observed (at least in the US), because it is coupled with very large debt to manage, a government not particularly socially-welfarist to say the least (which is saying something at all, for the US) and the sort of financial deregulation and/or instrument not heretofore seen (or used to buy houses, come to that).

Jim Kunstler’s take on the ‘newness’ of the phenonemon is something else – and I don’t think his death of Happy Motoring is all that far off. Sub-prime lending, cheap oil, even (as I recently discussed) reverse mortgages have an effect. Wages that have gone exactly nowhere in several years now have most certainly not helped.

I’m inclinded to say neither a slump nor a crash besets us (unless house prices really do go off the side of the cliff if a recession hits later this year – although that will be standard macroeconomics, give-or-take. Certainly we dismal scientists will easily explain it away), but rather a correction – a return of housing to levels of price and ownership that match the state of the economy. We’ve been living in the emperor’s new clothes, or the cake we’ve been having and eating, probably as long as we could have expected to get away with it. Low low interest, sub-prime lending, cheap-oil commutes, all contributed to a boom not only in house-building but house-price-paying, and it had to end when those drivers ran/run out of steam.

My hope is just that it does so slowly enough, and under a government competent enough, to avoid the ‘crash’ of the crash.

Affordability

Meanwhile, even as houses become less pricy, they are becoming less affordable (empathy, Australians!). From CNN (via the Big Picture):

According to the 2007 State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University, 17 million of American households in 2005 were putting more than half their income into paying for shelter – a rise of 1.2 million from the prior year, and a jump of 3.2 million from 2001.

Mortgage rates have generally been a favorable part of the equation. Since the start of 2001, they’ve ranged from an average of 5.23 percent for a 30-year fixed in June, 2003 to 7.16 percent in June of 2006. Even after the Federal Reserve started raising its rates in June, 2004, mortgage rates stayed low.

Median income, however, has dropped. Real wages fell from 2000 to 2005, according to the report. By 2006 household income was 1 percent below 1999 levels, according to stats from the Current Population Study of the U.S. Census Bureau.

Quite a different beast than that faced in Australia. Here prices may fall, but mortgage rates have to leave their fantasy land of the last few years, and nothing, apparently, can compete with this administration’s war on real wages.

Howard finally gets on the broadband wagon

The government is announcing/has announced partners Optus and Elders have won funding for establishing broadband access – Broadband for everyone ‘by June 2009′.

Federal Communications Minister Helen Coonan says 99 per cent of Australians will have access to fast affordable broadband internet by June 2009.

Senator Coonan announced Opel, a joint venture between Optus and Elders, had been awarded $958 million from the Broadband Connect Infrastructure Program to build a wireless internet network in regional Australia.

In addition, Opel will contribute $900 million of its own funds to the network.

First, that name is the work of just plain laziness. But, second, did the Treasurer not recently go nuts on Labor for saying they’d spend money on this? This involves AUD958m? Go figure.

Note the ‘regional’ bit. In fact, the SMH reports,

Senator Coonan also confirmed an expert taskforce of eight people would be set up to assess rival proposals for a fibre-optic network in the major cities.

Wayne Swan, Labor’s shadow minister for the Treasury, referred to Howard’s portending creation of a ‘digital underclass’ – i.e. one version of high-speed internet access for the bush, one for the cities. I find the fact that we’ll likely have different companies doing each a particularly bad sign, also.

Oddly, it seems not everyone even knew about the public money on offer:

Opposition communications spokesman Stephen Conroy said yesterday he had asked the auditor-general, Ian McPhee, to investigate the tender process for the Broadband Connect program.

He said not all parties involved in the tender process were aware that they could apply for more than $600 million in funding.

“Given the limited period allowed for the preparation of bids in the Broadband Connect tender, this delay in providing equal information to all participants significantly disadvantaged some bidders,” he said.

I must confess, I’m kind of glad those companies missed out – I’d prefer a little more initiative on the part of the providers of rural/regional FTTN networks.

Interestingly (I mean, over and above Howard’s electioneering approach to something as critical for Australia’s long-term economic growth and international competitiveness), Telstra is not only missing out on the regional/rural market, but facing heavy-enough involvement by the ACCC if they do emerge with the urban end of the government’s broadband concessions.

It is understood an ACCC official will be included on the panel. There will also be officials from Treasury, the Department of Communications, Information, Technology and the Arts and the Department of Prime Minister and Cabinet.

New Zealand isn’t happy about it, either.

Environmentally Friendly New Jet Planned

More Aeronautical fun:

British low-cost airline easyJet has unveiled a design for a radically different-looking short-haul airliner that it says would be highly environmentally friendly and could be built by 2015.

From LiveScience:

Neat, no? NASA (the first A stands for “Aeronautics”, something we are inclined to forget) found in 2004 that a 1% increase in cirrus clouds over the US was probably due to air traffic (in particular the trails of condensation left by the jet engine – Brits in particular will be familiar with this, as on colder morning white trails are easily visibly across the sky). These allow heat from the Sun in, but then don’t let it (from the Earth) back out – contributing to global warming.

Those doohickies at the back (aeoronautics is not my bag – I have a colleague who could do well with that sort of thing) take care of some of that, while being 25% quieter (quote. I would have said “25% less God-awfully deafening and noise-polluting”, but that’s just me). Less weight in its airframe contributes to a lowering of CO₂ emissions, as does an improvement in ‘air traffic control technology and design’. Which isn’t within easyJet’s purview, really.

However.

Robert Culleymore, an analyst at Aviation Economics, said easyJet’s projections were over-optimistic. “To get to a 50 per cent reduction would require a fairly revolutionary breakthrough,” Mr Culleymore said. “Both Airbus and Boeing are already in the process of designing replacements for the type of plane that easyJet flies, but the 50 per cent target would also require huge strides forward from engine manufacturers.”

Engines also aren’t really within easyJet’s purview. However, back to Robert Cullymore,

“Easyjet’s statement serves two purposes,” Mr Culleymore added. “It’s always good to ask for as much as you can get from manufacturers, but secondly, environment concerns are now at the forefront for aviation companies from a public relations perspective.”

So it can’t hurt. If only for the effect on contrails and noise pollution, I think the open-rotor design has a lot going for it. Airframe weight, engines, etc. appear to be on the agenda of the industry anyway, as I found yesterday. Every little bit helps, surely.

I’ll leave you with the last line from the Independent’s coverage of the story.

A spokesman for Ryanair, the Irish short-haul carrier that is easyJet’s biggest rival, dismissed the ecoJet idea, and said it had already invested in more modern, cleaner planes.

My youngest son came home today/His friends marched with him all the way

More on the potentially-to-be-vetoed Homeland Security Bill, passed by Congress. Like the Friends of Scooter Libby, Bush seems suddenly to have decided things are unfair. Forget not that the post-Gingrich revolution GOP is, if nothing else, unbelievably immune to charges of hypocrisy (and, now that they’re in the minority, we’ll see evermore bare-faced examples of such).

Bush’s radio address claimed the Homeland Security Bill was unacceptable because it was too expensive. As though the American people had prosperity of any worth or an economy of any strength, these days (all things being relative).

No, Bush’s objections are far more easily recognised for the Standard Fare they are of his presidency. As the Speaker of the House herself explained,

“The bill funds the hiring of 3,000 new border patrol agents, rejects the cuts President Bush sought in the training and equipping of first responders, and improves aviation and port security. It also includes strong accountability measures to make certain that taxpayer dollars are being well-spent, including requiring that contracts be competitively bid.

It doesn’t take a Michael Moore fan to know that this administration has given far more attention to the appearance of enacting security than actually securing things (like ports).

Requiring that contracts be bid for, competitively? Outrageous (we just learned, for example, that the head of the mailroom in Walter Reed – the one that had hadn’t delivered 4,500 letter and parcels – was a contract employee. This administration, if nothing else, has seemingly dedicated itself to the demonstration of what a clusterfuck Government By Private Contracts is). The use of no-bid contracts by this administration makes exemplification of cost-plus pricing one of the easiest parts of my curriculum.

At the same time, the bill calls for more money to be given, via grants, to states. Giving states money and responsibility for anything is not something in for which this Executive has ever gone.

Funding for this moronic fence idea has been withheld unless and until community-level consultation is undertaken. Again, this White House does not consult. It doesn’t consult Congress, why would it consults farmers losing crops to foolish, macho plu-patriotic border policies?

The other aspect of this that is probably driving into apoplexy people in the Executive who understand the concept (that does not, in all likelihood, include Bush) is the re-instatement, if you like, of prevailing wage rules for employees of the Department of Homeland Security.

A ‘prevailing wage‘ condition is usually tied to contracting. So when a US firm actually makes everything overseas, the US government can require that they pay prevailing wages – i.e. no less than average wages for the region in which they manufacture cheap crap for the American market. Naomi Klein’s No Logo contains probably the best explanations of special trade zones, specifically the manner in which they are tailor-made to get around such things.

Closer to home, it actually sits in the Davis-Bacon Act (1931), and says that when the government undertakes public works, it must pay its workers the prevailing wage for that region. The White House thought it had pulled off quite a back-washing coup when it suspended this provision for reconstruction in/of New Orleans. It eventually had to climb down from this thoroughly reprehensibly immoral position (although the about-face was not retroactive, so they got a good two months out of it).

Republican legislators and Andy Card insisted that Davis-Bacon was a component of normality, congratulating themselves for returning to it (bear in mind Bush also announced how proud he was that the US had gone ahead with the 2006 election, despite the war – as though to do otherwise had occurred to anyone else besides him and his Vice-Presidents’ horrid little gang of thugs). The Washington Post had a different perspective:

The decision was a rare victory for organized labor during George W. Bush’s presidency. It was a defeat for traditional Bush allies, including the construction industry and conservatives in Congress. Yesterday, both groups said the president’s reversal would inflate the cost of reconstruction.

And now the Democratic Congress has had the temerity to demand that prevailing wage rules apply to all Department of Homeland Security hiring (except during an emergency – which makes one wonder what in hell else the White House had been planning on suspending David-Bacon for?).

I suspect this is going to become more and more the norm. Now that the GOP can’t just get lawyers to write their legislation for them to push out at 1am in the morning, can’t just use the Senate back-rooms to change legislation entirely once it’s been written and voted-on, or will ultimately be removed by a signing statement (check out this editorial at the Baltimore Chronicle, though), a lot more crying of ‘foul’ is no doubt ahead of us.

Bush slams Democrats’ spending habits, threatens vetoes

ABC News’ Jon D. Garcia reports:

President Bush condemned Democrats for excessive spending during his weekly radio address this morning, vowing to veto any bill he deems fiscally irresponsible. The harsh remarks come a day after Congress passed a $37 billion Homeland Security budget bill, roughly $2.1 billion more than what the President requested. House Republicans rallied 147 votes against the bill, enough to uphold a potential presidential veto.

“The American people do not want to return to the days of tax and spend policies,” Bush said. “They expect accountability and fiscal discipline in Washington, D.C. And I will use my veto to stop tax increases and runaway spending that threaten the strength of our economy and the prosperity of our people.”

There is no way more than about 5 people in this country can be stupid enough to buy this line. Please tell me there aren’t people out there believing this shit.

This, by the by, is the US public debt:

So is this:

The Outstanding Public Debt as of 17 Jun 2007 at 03:04:17 PM GMT is USD8,838,718,628,183.49

The estimated population of the United States is 302,183,529 so each citizen’s share of this debt is $29,249.50.

The National Debt has continued to increase an average of $1.27 billion per day since September 29, 2006.

That’s under Republican control of just about everything from the Executive branch down to Comptroller.

Governing by elections

I so rarely watch the telly – I am this morning because David Corn is to be on George Stephanopoulos’ This Week with George Stephanopoulos.

Television advertising is like a bloody children’s story hour. I want to have an aneurysm, then climb inside the television, beating advertiser’s to death while screaming that we’re adults out here. I also watched BP state that they’d invested USD28bn in US energy, “including” wind, solar, etc. I wondered how many viewers besides myself understood that renewables didn’t come within spitting distance of the full 28bn.

Ooh, David Corn is on now. With George Will. He always strikes me as a man they ought to replace with Tom Oliphant – he’d be far more interesting.

What struck me, though, was the preceding segment, an interview with South Carolina Republican Senator (and Presidential candidate) Lindsay Graham. He said two noteworthy things:

1) With reference to immigration, “This is an attack on our culture.” Our culture, of course, being the Fox News white, Christian male power structure, of which Bill O’Reilly and John Gibson are so fond. I found the sentiment not a little disgusting (if he wins, he can make friends with Peter Costello – who by then will be leader of the opposition in Australia).

2) With reference to his plans for running the country: “We will govern according to the next election.” I’ve mentioned this previously: this is fundamentally anti-democratic, anti-majoritarian thinking. You govern according to dialogue with the people you represent. Whether you’re a direct, consensus or representative democracy, you stay up-to-date on what your constituents want, coupled with what you, with a better perspective (potentially), recognise is in their best interests.

In an information age, the idea that we only need to hear from and talk to our representatives once every 4 years, then send them off to Washington to do what they think is best (for whomever they think it is best) is fundamentally un-democratic. It’s exactly the sort of thinking and electoral and political permissiveness that gave us practicaly zero accountability and Bush the Decider.