Foreclosures are up just about everywhere, we suppose, but nowhere more than ... you guessed it - Las Vegas, Nevada. Quite recently The Frugal Scotsman discussed Las Vegas as a bellweather of foreclosure catastrophe. In the post, he surmised basically everyone in Las Vegas with a mortgage is 'underwater' - owing more than their property is worth.
Well, we discovered in this CNNMoney.com article that fully one in fifty-six households in Las Vegas suffered foreclosure process last month alone. Unfortunately, the article does not define household precisely. If it did, we would know if that meant households in general - owners and renters alike - or if it meant households that are owners. If it is the former, since about half of households own with a mortgage, the rate would be approximately one in thirty households with a mortgage...in one month!
At that rate, should it continue, it would take but a few years to achieve complete Real Estate Gotterdammerung - wipe out for every mortgage holder: either walking away, or having a date with some deputies. We do not see this being particularly unlikely.
Even if the article were using a non-standard definition of household to mean homeowner, it would be still approximately one in forty homeowners with mortgages facing losing their houses.
Like the apocryphal lemmings going over the cliff, participants in the Great Las Vegas Housing Bubble seem to have experienced herd behaviour at its worst and are paying the price. Las Vegas is the worst in the USA for now, but only because it represents the non plus ultra of how bad things can get.
We have no doubt that many other cities, and indeed even whole regions, will suffer similar fates. As much as one-third of householders will be removing to rentals, friends, relatives, shelters, or the streets (depending on their resources) in the space of a few years. But this is only a portion of what is shaping up to be the greatest economic calamity in the nation's history. Mass unemployment, underemployment and widespread ruin are developing concurrently.
Showing posts with label umemployment. Show all posts
Showing posts with label umemployment. Show all posts
Thursday, May 14, 2009
Monday, March 16, 2009
Peak Automobiles
CNN reports "Autos on U.S. roads set to fall." This is an unprecedented event. The automobile has been a defining aspect of American life. For most Americans, their first car is a right-of-passage. Likewise, most Americans consider their car indespensible.
The article suggests that the decline is mostly the abandonment of excess cars - moving from three cars in the drive to two. But it also hints at a decline of demand due to increasing unemployment.
Nowhere does the article suggest, as we do, that a permanent decline in incomes will produce a permanent decline in the need for autos. We don't think that view will ever make the mainstream. In the future, decline in auto use will mostly be reported as an increasing preference for urban life - or not at all.
In light of this development, bailing out U.S. automakers seems especially deranged. The industry already had excess capacity during the bubble years. Now it is even more questionable just how much manufacturing capability is needed. Certainly the U.S. Government is in no position to make this decision. Supposedly, that is what markets are for.
Oh wait, there is no market economy any more. If a big corporation with armies of lobbyists is losing money, the market can be swept aside, and Uncle Sam will pull out his teat.
Destroying economic value by perpetuating chronically loss-making operations was probably the main thing that did in the Soviet Union. Evidently nobody in Washington was paying attention at the time. Those who do not learn from history are condemned to repeat it.
The article suggests that the decline is mostly the abandonment of excess cars - moving from three cars in the drive to two. But it also hints at a decline of demand due to increasing unemployment.
Nowhere does the article suggest, as we do, that a permanent decline in incomes will produce a permanent decline in the need for autos. We don't think that view will ever make the mainstream. In the future, decline in auto use will mostly be reported as an increasing preference for urban life - or not at all.
In light of this development, bailing out U.S. automakers seems especially deranged. The industry already had excess capacity during the bubble years. Now it is even more questionable just how much manufacturing capability is needed. Certainly the U.S. Government is in no position to make this decision. Supposedly, that is what markets are for.
Oh wait, there is no market economy any more. If a big corporation with armies of lobbyists is losing money, the market can be swept aside, and Uncle Sam will pull out his teat.
Destroying economic value by perpetuating chronically loss-making operations was probably the main thing that did in the Soviet Union. Evidently nobody in Washington was paying attention at the time. Those who do not learn from history are condemned to repeat it.
Sunday, November 16, 2008
Looking Back
One difficulty in raising awareness of the 2008 Depression is the lack of a strict definition of an economic depression. There are some rules of thumb, but they allow for 'wiggle-room' in their application. This, coupled with denial about the situation, allows commentators to avoid directly saying the United States is in a depression. Although such hesitation is understandable, it is not helpful to those making decisions in this Depression. It is therefore extremely important that you, Reader, arm yourself with the tools to analyse the situation for yourself.
In identifying a depression, it is best to not look at arbitrary measures, but rather history. The most familiar example in the United States is, of course, the Great Depression of 1929-1939. To show the severity of this Depression we will use the Dow Jones Industrial Average as a primary example. The Dow, then as today, represented the largest and strongest corporations. The Dow reached its peak on September 3rd, 1929 and proceeded to lose 89% of its value, finally reaching its bottom on July 8th, 1932. Other, smaller markets fared even worse than this.
Unemployment in 1930 reached 25% and remained there more or less throughout that Depression, and was still at 15% at 1940. By 1932, the average income of the American household had fallen 40%. The depth of that Depression was finally reached in 1933, after American industrial output dropped by over 50%. Over 9,000 banks failed during the 1930's. Recovery was slow and arduous, and the catastrophe left its mark on the economy and citizens of the United States along with most of the rest of the world for decades following. For example, the Dow Jones Industrial Average did not sustainably reach its 1929 high until the 1950's, even with an exploding population.
What you, Reader, should take away from reading about the 1929 Depression is not the numbers. It is the scale of the collapse that you should remember: a near-total wipe-out of value on the stock market; vast numbers of people unemployed; and many businesses of all sizes failed. Most importantly was the pervasiveness of the Depression. It lasted ten years and its effects lasted for decades following, fundamentally changing the nature of the United States. So, too, will the 2008 Depression change the way Americans live.
In identifying a depression, it is best to not look at arbitrary measures, but rather history. The most familiar example in the United States is, of course, the Great Depression of 1929-1939. To show the severity of this Depression we will use the Dow Jones Industrial Average as a primary example. The Dow, then as today, represented the largest and strongest corporations. The Dow reached its peak on September 3rd, 1929 and proceeded to lose 89% of its value, finally reaching its bottom on July 8th, 1932. Other, smaller markets fared even worse than this.
Unemployment in 1930 reached 25% and remained there more or less throughout that Depression, and was still at 15% at 1940. By 1932, the average income of the American household had fallen 40%. The depth of that Depression was finally reached in 1933, after American industrial output dropped by over 50%. Over 9,000 banks failed during the 1930's. Recovery was slow and arduous, and the catastrophe left its mark on the economy and citizens of the United States along with most of the rest of the world for decades following. For example, the Dow Jones Industrial Average did not sustainably reach its 1929 high until the 1950's, even with an exploding population.
What you, Reader, should take away from reading about the 1929 Depression is not the numbers. It is the scale of the collapse that you should remember: a near-total wipe-out of value on the stock market; vast numbers of people unemployed; and many businesses of all sizes failed. Most importantly was the pervasiveness of the Depression. It lasted ten years and its effects lasted for decades following, fundamentally changing the nature of the United States. So, too, will the 2008 Depression change the way Americans live.
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