Yves here. This post provides a much-needed departure from a lot of election-eve commentary. It focuses on root causes of American discontent and strife, which is inequality and rising economic stress and how neither major party has much interest in delivering concrete material benefits to ordinary citizens.
Of course, another way to summarize why citizens are so unhappy and why that unhappiness is playing out in such an extreme form in American society is Lambert’s Neo-liberalism Expressed as Simple Rules:
Rule #1: Because markets
Rule #2: Go die!
By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website
With every tick, the election clock feels like dread closing in on Americans.
A recent Forbes Health survey shows that over 60% of participants consider their mental health to be under siege, grappling with everything from mild anxiety to deep distress as the political circus intensifies. A LifeStance Health survey backs this up, revealing that a staggering 79% of Americans feel anxious about the upcoming presidential election, exposing a nationwide mental health crisis fueled by political chaos. Younger generations are taking the hardest hit, with nearly two-thirds of Gen Z and millennials feeling serious stress. Many are changing their social media habits and hitting pause on major life decisions.
There’s even a text hotline to help stressed-out voters cope. According to the American Psychological Association, politics has become a significant source of chronic stress, significantly impacting our physical and mental health—and it’s only getting worse.
This election has devolved into a nightmare of fierce partisanship, marked by assassination attempts, courtroom battles, and the threat of prolonged battles over a contested outcome, even possible violence. Social media feuds, strained family dinners, and alienated neighbors only make it worse. The left warns about “fascism” and “the last free election,” while the right screams about “woke elites” and a “Communist takeover.”
Staying politically engaged feels like swallowing broken glass. How did we get here?
While it’s undeniable that the 21st century has handed us a parade of dystopian delights—9/11, the 2007-2008 financial crisis, and the Covid pandemic—leaving ordinary folks feeling trampled, betrayed, and thoroughly disempowered by the responses — the truth is, the rabbit hole goes much deeper.
Take, for instance, a little nugget you won’t hear most politicians mention—America has been slipping into the mold of a developing nation for quite a while now. For decades, we’ve seen something emerge in place of the more egalitarian, hopeful America we once knew, and it’s not a Communist or fascist America (yet). It’s a Third World America: a country divided not by party membership, but by economic realities. Noted economist Peter Temin has shown that U.S. citizens now live in two distinct sectors: roughly 80% in the low-wage sector and about 20% in the affluent sector.
People get sorted not so much into red and blue worlds but into different financial systems, living conditions, and educational opportunities. When they get sick, deal with the law, travel—you name it—their experiences are like night and day. They exist in separate spheres. Pretty much the only way for someone in the low-wage sector to break into the affluent one is through a top-notch education—but that path is riddled with obstacles, even if you can find the money.
For most, escape is a distant dream.
The well-educated affluent sector makes decisions, sets the agenda, while the rest are just trying to survive – and getting sicker and dying younger. One cohort makes moves, while the other is caught in the aftermath.
As a rule, here’s what usually happens when a country splits into a dual economy:
- The low-wage sector has hardly any say in public policy.
- The high-income sector keeps wages down in the low-wage area to secure cheap labor for their businesses.
- Social control is used to keep low-wage workers from pushing back against policies that favor the wealthy.
- The main goal for the richest in the high-income sector is to cut taxes.
- Social and economic mobility become rarer.
Does any of this sound familiar? Sure, social media magnifies divisions among Americans, but interestingly, ordinary people within the Republican and Democratic parties aren’t so very far apart in the basic things they want, never mind what Fox or MSNBC tells you.
- Across party lines, the majority of Americans support raising taxes on the wealthy and big corporations.
- Most Americans want to increase Social Security benefits and oppose cuts.
- The majority favor higher taxes on the wealthy to keep Social Security robust.
- Most U.S. adults think the federal government should guarantee healthcare coverage for everyone. The majority favor single-payer – a single government program for healthcare.
- A bipartisan majority of voters want to expand Medicare to cover long-term, in-home care services.
And on it goes. Americans see very little real action from politicians in either party on these issues. In fact, they often see the opposite. Misleading rhetoric won’t make their concerns vanish.
The electorate is not stupid. Most Americans know perfectly well that their wages have not kept up with inflation, no matter how politicians try to spin it. They see the ever-rising costs of essential goods — keeping a roof over their heads, seeing a doctor, and going to college. They realize that the rich are profiting off their hard work and refusing to contribute their fair share in taxes. Black men, in particular, are worse off than they were before the pandemic – and people wonder why they aren’t supporting the status quo as they once did.
Americans sense the gap between the rich and poor is wider now than it used to be, and they are correct. No politician can erase the following facts: Over the past 40 years, the richest 1% of Americans have experienced the fastest income growth. From 1979 to 2021, the average income of the top 0.01%—about 12,000 households—grew nearly 27 times faster than that of the bottom 20%. By 2021, the top 1% earned, on average, 139 times more than the bottom 20%. Income inequality has reached extreme levels. The pie is being gobbled up by the rich, leaving miserable slivers for hard-working people.
The U.S. income divide wasn’t always this extreme. In the early 1900s, social movements and progressive policies fought Gilded Age inequality, advocating for fair taxes and unions. The New Deal provided crucial support for ordinary people, including social security and labor protections. But those efforts have faded since the 70s – or been crushed — deepening inequality and leading to serious social, health, and political consequences that Americans now recognize.
In theory, democracy is supposed to adapt to the needs of the people, ready to handle crises and promote peaceful political change. But how’s that working out? With wealth concentrated as it is and the rich able to manipulate the political system, not very well.
Capitalism promised abundance but left us with long hours, workplace surveillance, insecure jobs, and little control. Rather than delivering prosperity, it’s given rise to increasingly predatory entities that undermine the businesses we depend on and reduce us to sitting ducks—like private equity—an industry that lines the pockets of politicians from both parties while gaining control over everything from emergency rooms and nursing homes to classrooms and housing markets. We’re getting looted, but the private equity industry often operates behind the scenes, making it difficult to pinpoint why many businesses are delivering subpar services and taking advantage of consumers.
We know we’re being preyed upon, underpaid, and our work often strips us of our humanity. With scant parental leave and unaffordable childcare, it’s no surprise many are hesitant about having families. This year, 30% of 18-34-year-olds are unsure about having kids. Elon Musk giving away his sperm won’t change that.
Neoliberalism—where the market rules all—has crushed us by prioritizing profit over well-being, widening inequality, and dismantling social safety nets. As public services get privatized and deregulated, the basics we need to live become harder to access. This focus on market solutions leads to job insecurity, with workers facing unstable jobs and stagnant wages while the rich keep getting richer. Both Republicans and Democrats have jumped on the neoliberal bandwagon since the late 20th century. Conservatives were the initial champions, but many liberals jumped aboard, resulting in a bipartisan push for globalization, trade deals, and welfare reform that has entrenched neoliberal principles across the board.
The result is that with paths blocked to economic security, social status, and political influence, people feel loneliness, rage, and resignation—or all of the above. A future we never wanted is being forced on us. Just like a self-driving car follows a programmer’s instructions, we find ourselves without real control. We’re not in the driver’s seat—and we know it.
Politicians, fully aware of the deep alienation out there, spin narratives that frame policies benefiting the wealthy as vital for efficiency and economic growth, masking their true motives with fake promises of individual success that distract us from the widening wealth gap and completely ignore our collective well-being.
Meanwhile, in a world plagued by war, climate change, disease, and the chaos of demagoguery, the familiar is fading. The new—like advancements in AI—feels increasingly bewildering and downright frightening.
German sociologist Max Weber offers valuable insight into the psychic depths of our current dynamics, highlighting how rationalization distorts human behavior and shifts power. In a rationalized world, logic and efficiency overshadow community, family, and empathy. As these connections fade, relationships turn transactional, pushing us to prioritize personal success over collective well-being. This focus on efficiency leaves us feeling isolated in a society that values numbers over genuine experiences. We’re told this is progress, but it often feels instinctively wrong: we become cogs in a machine, disconnected from the meaning of our actions. Our emotional and ethical lives shrink, leading to disillusionment with our social and political worlds.
Weber warned that this shift could eat away at the trust and morals needed for good governance, anticipating that charismatic leaders would rise to challenge the lifeless norms created by elites. We find ourselves in a deep crisis in the ways we understand ourselves and relate to others and our circumstances.
Publisher Judith Gurewich, a sociologist and practicing Lacanian psychoanalyst, points out that our old tactics for pretending things are different no longer work. She argues that the work of Weber can shift our focus from individual experiences to a broader collective understanding.
Gurewich suggests that part of the anxiety of the electorate “comes from the fact that the stupidity of their leaders is so much greater than their own.” Plus, the current election has magnified feelings of helplessness. “All is exposed,” she points out. “We are completely at the mercy of some play of dice. It doesn’t matter where they land: it’s going to be bad or it’s going to be horrible, and people feel powerless to do anything. They can go in the street as much as they want, but they feel that nothing is changing. So there is a sense of implacable logic.”
We find ourselves in a bewildering, Kafkaesque world where words no longer seem to matter. Gurewich highlights “Verstehen,” a key concept from Weber that focuses on understanding social actions by grasping people’s motivations and meanings.
“Weber argued that if you give people a reason to suffer—one that is logical and meaningful—they will accept that suffering. He compared this to different types of religions, where people might refrain from eating because there’s a story behind it that makes sense. For instance, they may believe they must endure hunger for the salvation of their souls. The narratives people hold onto provide meaning in their lives, even if suffering is part of the equation. But current politics offers no narratives to make the suffering meaningful to anyone. Capitalism doesn’t even have to justify itself anymore.”
This may be why beyond the anxiety, a disillusionment has spread over the political processes – a dangerous environment where people become apathetic or, conversely, radicalized, seeking out alternative movements or leaders who promise change without addressing the underlying issues. Politicians can tap into this vulnerability, stoking fear and division to gain support, while genuine concerns get sidelined. Ultimately, the erosion of meaning in suffering can destabilize the political landscape, making it ripe for populism, authoritarianism, or other disruptive forces that thrive on discontent and chaos.
So here we are, looking over a political abyss, and it’s clear that this is about more than just electoral anxiety; we’re facing a crisis of meaning. Voters are fed up with a system that churns out candidates who offer little more than empty slogans and theatrical performances. The pain of disconnection—between our lived experiences and the hollow narratives spun by our leaders—leaves us disenchanted, lacking meaningful stories to anchor us, looking for something real.
If we really want to reclaim our democracy, we need leaders who not only grasp the depth of our suffering but also present a vision that speaks to our shared humanity. Otherwise, we’re just going to be stuck as passive spectators in a political theater that’s lost the plot and doesn’t serve us anymore.
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Yves Smith: Thanks for this post. Parramore writes succinctly and with great insight. Those quotes from Gurewich are eye-opening, indeed.
Yes, it is about income inequality, neoliberalism, and the duo-party determination to dismantle the New Deal, to excise the years 1930 through 1980 from U.S. thought, U.S. memory, and Americans’ aspirations.
We can expect Facbk and other social media in a few hours to be brimming with caterwauling about misogyny and fascism, “visceral hatreds” and handwaving. With nary a mention of the bipartisan destruction of the social state, the bipartisan looting of all the “free markets,” and the bipartisan war profiteering that now motivates the war in Ukraine and the slaughter in the Levant.
In 2012, on a visit to Vegas, waiting for a rental car at the recent ‘hub’ which had been formed by all the major car rental shops, a young black girl manning the head of the line asked where we were from and where’d we’d been and after chatting with her for a few minutes she said she liked hearing people’s descriptions of their travels since she knew she’d never get to go places herself. That was the day I knew neo- liberalusm had broken America and would break the world; it kills dreams and with that, people.
Jane, this is probably the most moving and at the same time explanatory comment I’ve seen in a couple decades of following NC. In one short scene you reveal both the cause and the cost of our social and political decay. Thank you.
The political process has become a grift and the majority of people are the marks… using passive language like “..a world plagued by war..” takes away from the much clearer explanation that our leaders are “stupid”. Biden, Starmer, Scholz, Macron are all as dumb as rocks and thats the way the Big Money guys who control the governments like it… unfortunately the oligarchs are also dumb as rocks and disconnected from the everyday realities that most of us face. Complex psychology is not needed. The collective enemy is unregulated capitalism.
They are (the “leaders” as dumb as rocks because they don’t need to be “smart,” they just let the System do the work–this System pretty much runs itself and doesn’t even need AI because it already is a distributed neural-style network that takes inputs (what the oligarchs want) and delivers policy. This issue of income disparities cannot be changed even if a “leader” wanted to change it. Also no leader can emerge from the public. Where are they going to come from? The political process starting from local politics becomes increasingly corrupt as one moves up the ladder and, eventually, comes to the land of “no good deed goes unpunished” i.e., the world of Washington DC. Then these corrupt leaders (they have to be corrupt, they have to lie to stay in the game) rule an international Empire with extraordinary firepower that kills millions of people directly and indirectly. So viola! The only cure is some version of chaos in which we are inching towards. Our only hope is if the oligarchs have mercy on us hence our neo-feudal future.
I hate to contradict, but they are NOT dumb as rocks. They have different priorities. Their priorities serve only the short term interests of the políticos and “captains of industry”. To hell with the 90% (us)
Maybe we are the ones that are dumb as rocks. Is there another way that does not involve “Up against the wall!!”? Sherlock Holmes said (to paraphrase) that when you eliminate all other posibilities sometimes the unthinkable is the answer.
They have unquestionably gotten dumber throughout my lifetime. They may be smart (like prototypical empty suit Harris) at working the system to get ahead, but they bring no intelligence to any of the tasks that need to be done once they get “there”. Our State Department is now incapable of diplomacy, no matter how cleverly the people running it have staged their infiltration of the system. So we end up pushing China and Russia together and making them seem sympathetric to over half the planet, which would count as an own goal in any of the previous administrations up through Bush Sr. People like Eisenhower, Kennedy, LBJ, and Nixon look like Einstein-level geniuses compared to our last few Presidents, in spite of the numerous bad things those four did (or allowed to happen) on their watches.
Some are dumb as rocks (not to insult rocks). To wit, I give you. . . Liz Truss.
They are shark brained. Highly efficient and intelligent and ruthless when it comes to finding their next meal, which in the oligarch’s case is maximizing profit and market dominance; yet utterly clueless outside of their domain. It is a huge mistake to think that their competence within their domain will translate to competence outside their domain.
Lynn’s points are all true and relevant, but there is a problem with her employer INET. There is no criticism of the role of finance in polarizing the economy along the lines she mentions. Soros/INET try to make financialization work, and they criticize stock buybacks and similar post-industrializing policies. But the financial system itself has blocked American entry into the middle class by making housing unaffordable, and by untaxing financial wealth at the cost of paying interest to borrow money that the government could be creating itself. All that discussion is anathema to finance-sponsored reformers.
This is ad hominem and a violation of our written site Policies. I will not approve any further comments along these lines. We do not play favorites with the enforcement of our Policies.
In addition, your critique is ill informed. Soros has not had influence over INET operations for nearly a decade. He did provide the initial funding, with considerable reluctance, and would even grumble about whether he should have funded INET at INET conferences. Both Soros himself and its staff did not want him to be the main funder and Rob Johnson pretty quickly found additional significant donors in the early and mid-teens. My understanding is Soros provided no funds beyond his initial gift…oh, expect sponsoring a dinner at the Paris Opera for one of the INET conferences, at which everyone had to listen to a sermon before dining, in the form of Chyrstia Freeland interviewing him. You can imagine what that was like. Even a room of (mainly) Europeans did not buy what they were selling on Ukraine (this well before the SMO). He has never had a role in approving INET research grants or the publications on its website.
I do not see how one attributes lack of housing affordability to “the financial system”. It is the result of US and Anglosphere policies to promote home ownership out of the view that homeownership promotes “stable communities” as in conservatism and also that homeownership generates spending on the house and consumer durables, and supports family formation, another big generator of consumer spending. Dean Baker has regularly inveighed against the fact that various housing subsidies result in prices being bid up. Gretchen Morgenson and Josh Rosner laid out how Fannie Mae built a political coalition for more generous mortgage finance, with black political leaders and home builders more influential than banks, since banks could easily wind up holding the bag by giving in to political pressure for more liberal lending terms for marginal borrowers.
Another factor contributing to lack of housing affordability are NIMBY zoning rules, particularly formal restrictions or votes against affordable housing, and related opposition in many places to high density housing, particularly apartment buildings, as opposed to single family homes. How is “the financial system” responsible for that?
A more recent factor is most local governments tolerating AirBnB letting investors buy or even just rent condos or homes and then treat them as rentals for transients. In the last place I lived, rentals of less than a month were verboten and fines if caught were stiff. So it is possible to check this sort of thing.
“This is ad hominem and a violation of our written site Policies”
Sure this is no mix-up?
I can see no ad hominem with Hudson´s post.
He is attacking Parramore while pretending not to, by depicting her as avoiding criticism of finance due to her affiliation with INET. So he is effectively saying she is a biased or self-censoring or even actually censored writer. At the same time, as I demonstrated, his hand-wave criticism does not hold up. He could have made a critique of the post but he instead aimed it at her and INET.
Is he saying she is self-censoring or suggesting that maybe she is censored by her publisher. Big difference there.
Lynn’s points are all true and relevant, but there is a problem with her employer INET
Lynn = the writer
INET = the publication
Either way it is ad hom and fails as an argument against her post. He does not prove his assertion, either about INET or his handwave about what makes housing unaffordable (it is a many vectored issue).
And he’s wrong about INET. I know the people there personally. I already debunked that.
Respectfully, a very quick duckduck go search of “private equity and housing prices” yielded a fair amount of articles arguing that private equity is buying up lots of houses and contributing towards increased housing costs (rental and ownership). There are of course articles that claim the contrary: https://www.theatlantic.com/ideas/archive/2023/01/housing-crisis-hedge-funds-private-equity-scapegoat/672839/. Nevertheless, inasmuch as private equity is part of the financial system, and PE contributes to higher housing prices, I think one can credibly claim that the “financial system” is contributing to higher housing prices. Thus, I think Professor Hudson can credibly make this claim.
As for INET, I have no information, but even if Professor Hudson is correct (and I am not saying he his correct), I can totally understand why people have to work at a place that has issues (gotta put food on the table!) and why purity is not always possible.
That said, I appreciated Ms. Parramore’s article, and I hope fences can be mended.
*Sigh*
Housing prices have been rising at 2x the rate of inflation since the 1960s. Banks were heavily regulated and not meaningful political players back then.
And even then, the entry of PE into real estate was AGAIN the result of policy. The Obama Administration wanted the GSEs (Fannie and Freddie) to unload their foreclosed properties pretty quickly. They floated the idea of bulk sales and private equity got very interested at the idea of buying at a bottom….in fact, so interested that the GSEs did “mini-bulks” instead.
As long as housing is treated as a commodity I can’t see how it ever can be “affordable” for millions of Americans. There will always be someone (foreign or domestic) that can and will offer more. Tweaking things with various regulations and policy shifts won’t solve this problem. Only full blown socialism with the vast majority of housing being publicly owned and financed can ensure a roof over everyone’s head. Owning a house being a path to wealth accumulation sounds great in theory, but in practice it creates lots of “losers” (those unable to afford to buy a home, build equity and thus wealth). Dreams for some become nightmares for others. We need a better way.
When a housing bubble begins to be written about:
https://www.nytimes.com/2002/08/16/opinion/mind-the-gap.html
August 16, 2002
Mind the Gap
By PAUL KRUGMAN
More and more people are using the B-word about the housing market. A recent analysis * by Dean Baker, of the Center for Economic Policy Research, makes a particularly compelling case for a housing bubble. House prices have run well ahead of rents, suggesting that people are now buying houses for speculation rather than merely for shelter. And the explanations one hears for those high prices sound more and more like the rationalizations one heard for Nasdaq 5,000.
If we do have a housing bubble, and it bursts, we’ll be looking a lot too Japanese for comfort….
* https://www.cepr.net/documents/publications/housing_2002_08.pdf
Good post by Parramore, incidentally.
Yves Smith: I do not see how one attributes lack of housing affordability to “the financial system”. It is the result of US and Anglosphere policies to promote home ownership.
It’s a gestalt, surely? In the case of the UK, forex, Thatcher was very much about promoting an “ownership society” but simultaneously this effectively turbocharged real estate asset inflation so that in a UK Gov current briefing on Industry in the UK —
https://commonslibrary.parliament.uk/research-briefings/cbp-8353/
— if you scroll to the second chart down, it’s a ranking of Economic Output by UK Industry as a percentage of national economic output and in first place is Real Estate, at a whopping 13.1% of UK output! How does that even work?
Like this: “Real estate was the largest individual industry accounting for 13.1% of GVA. However, most of this is the value of “imputed rents” which is a hypothetical estimate of what owner-occupiers would pay if they rented rather than owned their homes and not output generated by the industry.”
So there’s been a very definite effort to inflate real estate values to ‘create wealth’ to hide — or compensate for, if you like — the reality of an increasingly less productive UK economy.
This benefits the financial industry in any country where it happens, and creates the foundation for the superstructure of derivatives, CDOs, MBSs, etc. upon which that financial industry can gamble and create more profits for itself and its shareholders, which are considered real wealth under neoclassical economics. And thus that country’s financial industry increasingly dominates and its productive industry shrinks, and the financialization of its economy proceeds.
Same in the US, and elsewhere — not only the Anglosphere. It’s arguably the central feature of the Neoliberal Ponzi of the last forty years anywhere that this Ponzi has been run.
You are confirming my point. It was political policy that led to house price inflation. The banks did benefit but they were not the initiators.
And to your point, another factor that Matt Stoller discusses in his August 15 newsletter article in BIG is the role of the homebuilder cartel, a result of policy that allows consolidation in an industry or sector without restraint. Stoller points out that in 1994 the ten largest builders had 10% of the national market. This grew to one third of the market by 2018. The post GFC period saw 55% of residential developers disappear. Stoller estimates that the net effect of consolidation of homebuilders keeps 150k new homes from being built every year. Stoller’s closing comment: “It’s important to move the discussion about housing away from the focus on local regulations, as this dynamic is clearly a national problem involving a market structure [policy in other words] where price signals are not bringing in more supply, but are bringing higher margins to a small group of players.”
I don’t see the contradiction. It seems to me that financialization has been the policy for quite some time now. Low-interest thirty year mortgages started as a subsidy for homeowners, but predictably caused house prices to rise. This happens regardless of who started the process. It makes sense to debate when exactly the financiers turned financing into financialization, but I don’t see how we can debate that a process of financialization occurred and financialization allows financiers to become dominant.
Yves S: You are confirming my point. It was political policy that led to house price inflation. The banks did benefit but they were not the initiators.
Up to a point, Lord Copper. Perhaps best to say these two things — that is, the policies to support house ownership and to hand the mortgage industry to the banks (and thus financialization) are one — and were consciously seen as one overall policy by the politicians who enacted them.
Furthermore, the real-world history proves this. Certainly, in the case of the Thatcher regime in the UK (and the particularly extreme UK history is what I’ve been looking at).
Just as you note, banks were heavily regulated and mostly not meaningful political players up through the 1960s, and while this was less true of the City vis-à-vis the UK government, banks there were shut out of the residential RE market because it was a monopoly of the enormously successful building society movement, aka the ‘mutuals’ —
https://en.wikipedia.org/wiki/Building_society
I’ll spare us all the two centuries of history, but ‘the owner-occupier’ and ‘imputed rent value’ thing goes back literally to Adam Smith and Lord North. Fast forward to the 20th century’s second half, and the UK emerges from WWII with no RE assessments done since 1935-36. In 1955, with those valuations way obsolete, the Tories’ rank and file, keen to develop a ‘property-owning democracy’ (yes), and the surveyors’ association (for whom it was low profit margin work) called for the abolition of Schedule A (the old tax on income from UK land, dating back to Pitt the Younger and Addington). This was finally done in 1963.
Subsequently, when Labour squeaked into power in 1964, the building societies’ very success had meant that by 1959 owner-occupiers were over 40% of the electorate and Labour needed some of that vote to regain office. In 1965 the abolition of Schedule A was compounded by the introduction of Kaldor’s capital gains tax exempting the primary place of residence, as Labour had squeaked into power with a majority of 4 and there were worries that a person retiring from London to the provinces would face increasingly unpayable capital gains tax bill.
Simultaneously, there’d been informal agreement between the major UK banks to control credit, but thanks to the City’s renaissance via the rise of the Eurocurrency markets — sorry! — these credit controls were being circumvented by the new secondary banks, which were taking market share from the big five.
This produced the Bank of England’s Competition & Credit Control policy of 1971, which decontrolled credit and created the UK’s first house price bubble in 1971-73, then a rapid rise in bank rates in 1973 and many secondary lenders’ collapse, and was one factor in the IMF lifeline thrown to the UK in 1976. Credit was re-controlled in 1973 till 1980.
And then in 1970 the Thatcher regime comes to power.
In 1980 Nigel Lawson as financial secretary allows the banks to enter the residential mortgage market, explicitly as part of Thatcher’s ‘ownership society’. And of course the banks can create credit ex nihilo, giving them a massive advantage over the mutuals which could only lend what they had in deposits.
So in the UK the linkage between promoting home ownership and promoting financialization was very consciously carried out. And now every few years people pay twice as much for half the space, their ability to save for retirement is compromised, and more than 80% of bank credit is directed to a non-productive asset class instead of investment in productive capacity.
As far as I understand it, an analogous policy of creating residential RE asset inflation was accomplished in the US by: –
Firstly, Reagan’s deregulation efforts like the Garn-St. Germain Depository Institutions Act of 1982, deregulating S&Ls so they could offer adjustable-rate mortgages and invest in commercial real estate (which eventuated in the S&L crisis);
Secondly, Clinton’s (and GS honcho Robert Rubin’s) homeownership policies that, via HUD, promoted increased lending to ‘underserved communities’ and the subprime market’s growth, and which were enabled by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (letting banks operate across state lines, increasing competition and lending capacity) and the repeal in 1999 of Glass-Steagall.
The bottom line seems to point to a substantial and significant structural influence – if not control – of across the board political policy in favour of Wall Street/The City of London which favours financial and financialised interests in this and other policy areas.
A systemic structural position which some have argued has increasingly prevailed since the end of World War One.
Any potential attempt at compartmentalisation, say, by separating policy into pure political and pure financialisation within hard and fixed border silos with no systemic overlap of influence and control between them would seem to be a dead end task which would have foxed Einstein never mind Hercules.
As you very clearly imply, Michaelmas, systems just don’t work in such a reductionist way in the real world.
https://fred.stlouisfed.org/graph/?g=oEXC
January 15, 2018
Real Residential Property Prices for United States, United Kingdom, Canada, Australia and New Zealand, 1992-2024
(Indexed to 1992)
It is the old story or “what is a house worth?” Whatever the bank will loan for It,. Banks certainly have interests in housing cost inflation.
This is kind of a tangent, but the cause of housing unaffordability is constantly misidentified. We simply haven’t built enough of it. Household formation has exceeded new housing units constructed for every years since the Great Financial Crisis, and this doesn’t even account for the amount of the existing housing stock which becomes unusable each year. Construction never really recovered after the 2008 crisis and now we are reaping the results. There are other contributing factors, sure, plenty of what you mentioned obviously doesn’t help, but at its core it is and always has been a supply problem.
This is also why housing crash doomsayers have missed the mark so consistently for the past few years. This time really is different than 2008, and instead of lose credit policies it’s a lack of supply. Raising interest rates doesn’t help, at all, because most construction is debt financed and higher cost of capital equates to less projects getting greenlit which means less supply. Multifamily and single family permits are currently sitting at or near recession lows.
This crisis will only be solved via changing zoning laws to allow higher density construction, government subsidies for the construction of affordable housing (as you mentioned), other incentives to make building more housing more attractive financially, or some combination thereof. Everything else is at best a stopgap solution.
It’s all the factors at once. It’s the System. The System is a system of interlocked organizations and individuals that thrives on making money for the oligarchs and the oligarchy they’ve created. TINA is in effect because, culturally, we are a hyper-materialistic society that honors only “success.” Good luck in trying to change that.
It’s all the factors at once.
Thank you.
Complexity doesn’t always fit into narrow thinking frameworks.
Los of housing stock due to redlining – overt or covert-is Also a cause
That is not entirely true. In most major metropolitan areas there are tens of thousands of housing units that are purposely held vacant. Nobody knows the real number because government purposely doesn’t wish to know. They’d rather push the narrative of severe housing shortages because it benefits the various special interests – real estate developers, non-profits, unions, local politicians.
Part of the analytical challenge is separating the long view from the short. This link (below) will display both the Case-Shiller House Price Index (see 12M rolling) and the months supply of existing housing, depending on the menu item selected.
The recent (2020 – 2023) run-up in house prices in the US ties directly to houses for sale being withheld from the market because of the Covid pandemic. The fit of the data to this explanation is quite tight.
https://www.aei.org/home-price-appreciation-index-and-months-remaining-inventory/
At present, inventories are close to normal while prices remain at low-supply levels. With inventory back to normal levels, prices are likely to fall.
To Yves point, the Federal government has long (since the Great Depression) seen home ownership as crucial to political stability. It has therefore subsidized housing via rates and through the Agencies.
This invokes Michael’s long argument about the high structural costs that hem the US in in terms of international competition without having to identify the mechanisms through which the policy is carried out.
Last, debt service costs are a function of interest rates. I got into this with bankers around 2008 – 2009. In the graphs provided in the comments of others below, debt service payments clearly follow Fed policy up in the later stages of the housing bubble and down when the bubble burst.
Thank you for your comment, Doc!!!
#HUDSONHAWK
Appreciate you too, Yves!
GODZILLA vs MOTHRA of Popular Economists!
Have to admit I’m Hudson’s side over here in the US as the Banks won’t let me buy a house because of my “credit score.”
F the Banks and all Financial Capitalists!
Remember
Remember
The 5th of
November…
To vote, in a system such as this, is an affirmation of one’s consent of the system.
I don’t believe that one should give any effort or contribute to maintaining the edifice of “(our) democrasy” when clearly it isn’t: voting serves to perpetuate this lie.
Don’t live by lies: don’t add to the harms done.
Not voting is fine by me and what I did in 2020. This year I am so angry about war and genocide that I want my vote to register as a protest.
Me too! Jill Stein.
Jill Stein voter here too!
Check out what my local Louisiana Green Party sent me at 2AM 🕑 this morning:
Green Party Louisiana
Jonathan —
The Coordinating Committee of the Green Party of Louisiana calls on Dr. Butch Ware to withdraw as our party’s 2024 vice-presidential candidate. His recent comments on reproductive rights and trans liberation are disqualifying for a Green Party candidate, and his response to the resulting criticism only deepened our concerns. Dr. Ware claimed that his words were taken out of context and manipulated through selective editing. However, his statements are his own, presented in the exact order he delivered them. Rather than apologizing or clarifying his remarks—such as his use of the term “biological males” and other conservative rhetoric—he has chosen to attack his critics instead.
We encourage Greens and American voters to support Claudia de la Cruz and Karina Garcia in this election, as they stand firmly for reproductive freedom and trans liberation. Dr. Jill Stein and the Green Party of the United States’ silence on this matter is disheartening and has eroded our state party’s confidence in their leadership.
John Krause
Co-Chair
Naima Gayles
Co-Chair
Rivule Sykes
Secretary
Green Party of Louisiana
https://www.lagreens.org/
Hadn’t heard about this. Looked it up and apparently he said biological males shouldn’t be allowed to compete in women’s sports, something I wholeheartedly agree with. Now I like Ware even more. Your comment might be the tipping point to get me to the polls for Stein.
And the LA Green Party can [family blog] right off with their circular firing squad. If they truly think this is a winning position to take, they won’t have to worry about having anyone elected to office for quite some time.
To vote, in a system such as this, is an affirmation of one’s consent of the system.
I don’t think so. That assumes some sort of utopia where we had a choice, but we never had one. It’s about choosing the least bad course available for one’s country, one’ s fellow citizens and oneself given the options available, and they suck.
Well . . . . when I and enough other people voted for State-legal cannabis in Michigan, we got State-legal cannabis in Michigan.
Voting changed something.
( And by the way, a DemParty majority in the Michigan Legislature passed a law repealing the Snyder Republican Right To Work law, and the DemParty Governor Whitmer signed that repeal. So once again, voting changed something.)
What Americans understand viscerally is that the “American dream” of upward mobility is dead. It has been dying as wealth concentration into fewer and fewer hands has been and is accelerating. Without the great mythology of the American dream, the US really is just a third world country ruled by an oligarchy stuffing itself while the majority of American citizens go hungry in every aspect of their lives. Note that such wealth concentration, leading eventually into a feudal system of few nobles and many serfs (chattel), is not a bug but a feature of neo-liberalism. It is artificial and intentional which is why it is never addressed. Is this where the tether ends? If not yet, we are certainly getting close. Best to strangle both these oligarch serving political parties and start again with entities that actually value and support democracy and people and work for a better quality of life for all its citizens.
the US really is just a third world country ruled by an oligarchy stuffing itself while the majority of American citizens go hungry in every aspect of their lives.
I would say that the USA is becoming or has already become a typical American country: one controlled by an oligarchy, in a stupendously unequal system; two parties (Liberals and Conservatives, Blancos and Colorados, Democrats and Republicans…) switching places, each one more devoted to a specific faction of the oligarchy; a middle class under relentless economic stress and getting slowly but surely impoverished while the larger portion of the society just makes by in a low-wage or black-market sector; an economy tending towards deindustrialization and dominated by commodity production and trading; widespread criminality at all levels of society and insecurity, especially in “problematic” urban areas; priority given to security and military services.
In other words: Brazil with nukes. And with the mighty USD.
After just visiting Hong Kong and Macau and their futuristic transportation systems, I would say the US is the 4th world….
To me the US has felt like the post-collapse Second World . . . you know . . . Russia and Ukraine after the USSR collapse and especially after the Yeltsinization of all public property.
Eventually the Morlocks eat the Eloi …
Too much of the “American dream” that most living Americans would recognize was built off of our immediate post-World War II situation: cheap fossil fuels, few foreign competitors for our industry, strong unions, and government programs to keep the poorest from falling completely off the edge of the world. When Nixon came to Israel’s aid against the Arabs in 1973, that was the end of cheap fossil fuels (underscored when Carter let the Shah into the US in 1979). Foreign countries got back on their feet and started competing, and the Republicans and New Democrats have been helping to destroy the other three legs of the dream ever since the mid-1970s, by outsourcing jobs, minimizing the role of unions, and reducing programs for poor people (or crippling them with red tape regulations). All of which was highly conducive to the concomitant success of the financialized economy in destroying any hope of regaining the old order. The American dream was real for thirty years, struggling to survive for twenty more, and has been dead since.
“the US really is just a third world country ruled by an oligarchy”
Just to clarify, mgr, is this implying that what is defined as the “oligarchy” here enjoys a majority influence over the creation, setting and implementation of policy – such as, for example, the policy responsible for house price inflation?
If so, would it be reasonable to surmise that at least a part of the motivation of that oligarchy might be financial rather than, say, purely political?
Lots of people seem to be living in the past and pining for those mythical “good old days”. There are very good reasons for “upward mobility” to be dead. It should be dead and gone, because if it isn’t the planet we inhabit will be dead and gone for all intents and purposes. I don’t shed tears for the middle classes who live large and think they are entitled to a 2500 square foot house in a suburbs with good schools, a luxury SUV, foreign travel, good wine, nice restaurants, etc…They aren’t entitled to any of it.
As long as the political process is money-driven little chances are there for any leader as described in the last paragraph. With higher inequality money will increasingly drive politics in the same direction and the political regime less and less democratic, guided by the 1%, the 0,1%, the 0,01%. An oligarchic pseudo-democratic scheme. How can it be changed from a money-driven scheme to a more open scheme might be the key to take back the political regime to something remotely democratic. Does the US constitution (or the Constitution of any other country) have any safeguard against such drift? My guess is not or not strong enough.
Most Americans are driven by money and are money hungry. Therefore we have a political process driven by money
“We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.”
– Louis D. Brandeis
Collectively, we’ve made our choice. There is little interest in changing the system among the population of the USA. We complain but when given a choice we choose a system that delivers a lot of losers and a few winners so to speak. We now tend to be more compassionate towards pets than people particularly among women.
Oh there’s plenty of interest in changing the system down here in the South.
We are all pretty much in agreement among us workers and poors.
https://fred.stlouisfed.org/graph/?g=m5ih
January 30, 2018
Real Residential Property Prices for United States, 1992-2024
(Indexed to 1992)
https://fred.stlouisfed.org/graph/?g=rjNX
January 30, 2018
Mortgage Debt Service Payments as a percent of Disposable Personal Income, 1992-2024
https://fred.stlouisfed.org/graph/?g=1yLYa
January 30, 2018
Real Residential Property Price Index * and Mortgage Payments as percent of Disposable Personal Income, 1992-2024
* Indexed to 1992
Something doesn’t square, no? Maybe some words don’t mean what I think they mean?
Like who(m) is buying homes after GFC? Private Equity or private party? Graphs don’t explain the world.
(Insight: learn Russian and get free land near the Pacific Ocean.)
The United States is becoming a Third World country, but given the fact that it is the foreign policy of the United States that has made life miserable for those Third World countries, there is no other way to describe it but as karma.
As the Empire weakens, it spasms – i.e. devolves into the progenitor of chaos it has currently become – and exerts its pathological reflexes upon its last subject populations, those in the Empire itself.
Well written; I was going to comment on how it’s not just income inequality, but re-reading showed the article did address precariousness, unaffordable and inadequate health care, inadequate disaster relief, and helplessness (among other aspects).
There even is a mention of “looted,” which I think could have been better expressed as socialism for the billionaires, and neo-liberalism (the screw) for everyone else, all the while stovepiping hundreds of billions to support foreign wars.
When I was doing time at the UoC, portions of Weber’s “The Protestant Ethic and the Spirit of Capitalism” were part of the reading list. Hauling Weber into an economic argument is to be expected; his work has totemic virtue. Along with Durkheim, Freud, Marx, they formed the tingling spine of late 20th century Liberal edumacation at that College.
Some seek solace in the Sectarian Mumblings of Dead White European Males. That so few of my fellows represent the commitment to Social Justice that sometimes exemplifies the UoC (Sanders, Alinsky, students protesting on the Quad) is a testament to such sad obesiance.
That there is osmotic sorting through an economic membrane there should be no doubt. Perhaps it’s only my economic security that gives me freedom to protest the ongoing Levantine Genocide. That the political class perceives such protest as mere inutile insults does not strain the requirement for justice in this country and overseas. The foundations of the neo-colonial world we inhabit were laid by such philosophers. We learn from their arguments at our peril.
“Weber argued that if you give people a reason to suffer—one that is logical and meaningful—they will accept that suffering.”
With all due respect to Max Weber, all you need to do is blame a bogeyman for their suffering. As Göring said, “tell the people they are being attacked”. The Devil or Haitians coming to eat their pet cat or Putin stealing their election will do nicely. Logic and meaning only gets in the way.
That Weber quote in the article that you bring forth made me think: key to degrowf!?
(apologies, I tend to see the world through the lens of the looming Jackpot…)
True leaders, with recognized earned integrity, and unassailable intelligence, good heart, might be the key to a soft landing de-growth?
Paradigm shifts in values might allow humans to actually enjoy a different material lifestyle.
The only major threat would be the ‘suffering’ needs to be borne equally by all. That’s never been a part of the human experience in the modern industrial world that I have read about or experienced.
Give people a reason to suffer, juxtaposed to unreasonable suffering. Hmmm.
Fun read- thank you… happy to know others are in my ‘losing my shite’ boat. I think the Russians are known to say, “Misery loves company”.
“If we really want to reclaim our democracy, we need leaders who not only grasp the depth of our suffering but also present a vision that speaks to our shared humanity.”
We might as well wait for Jesus’ Second Coming. Even after all these years, I still find it dumbfounding that the integrity of the entire Western political system hinges on the government not getting captured by special interests.
Thank you Yves. Elections have become multibillion dollar mega entertainment events. It’s a prime environment for grifters and conmen, so no surprise that it’s grifters and conmen that populate the ballot. My phone buzzes, another rich person begging me for money.
Cause or symptom, doesn’t really matter because here we are.
Buy another lotto ticket young man, A (two actually) dollar and a dream, that’s the American way.
“Elections have become multibillion dollar mega entertainment events.”
In his very entertaining autobiography, the satirist Paul Krassner coined the term Dis-infotainment, which I think works quite well to describe how we’re amusing ourselves to death.
He must lose and she mustn’t win. So those are my pearls of wisdom concerning this horrendous, frightening situation in the country. She can’t speak without flirting and giggling, he can’t speak without blustering and preening. They’re not even cut out for each other. Where do we go from here as a country and a people? Any ideas? I place the most blame on Biden and the Democrats: if he had decided earlier not to run or they had dumped him earlier the party could have organised a primary. That is what they did not want, could not face. The Soviet solution was decided on: secrecy and cronyism. Democracy, my foot! And now let as start talking about abortion…again.
I take small comfort that some fellow citizens are developing war fatigue.
The enthusiasm manifested for Iraq War, Afghanistan War, Ukrainian war is not prominent for the Palestinian genocide.
The USA may have “jumped the shark” with it’s Gaza genocide support.
That we have two presidential candidates who don’t care about the general population is obvious to many.
While ostensibly campaigning to support the middle class, candidates gloss over that the lower classes seem to not matter.
And the struggling middle class is forgotten after the election.
In the future history books, I suspect the USA will be viewed as a profligate resource squanderer, that could have served as an example of good governance but chose to embrace the imperial elite, leaving destruction and misery for many of the world’s citizens, including the USA’s own.
I suspect that future history books in the regional successor states may tell very different stories about the downfall of the former United States.
Capitalism is not synonymous with a free market. When the medium enabling markets is privately managed, we are all tenant farmers to the banks.
Bacteria operate on an infinite growth formula as well. The advantage of multi cellular organisms is being able to sense and navigate the situation.
Societies evolve government as a nervous system and money and banking as blood and a circulation system. While we have evolved enough to understand government is a public utility, we’ve yet to recognize banking functions as one as well. We are at the stage where the banks are having their Let them eat cake moment.
Or maybe choking on their cake. I like the thought that PE stepped up to do the mopping up when housing and the economy tanked in 2008. They have made a lot of money. Like the story that brokers made their millions in 1929 by short selling. But what’s a rich PE corporation to do with all that cash? If the economy has lost its way? God forbid they should consider the environment and create a sustainable future. That’s a problem to meet their trillions and then some. Redemption. That’s where Verstehen should start.
>>>With every tick, the election clock feels like dread closing in on Americans.
I beg to disagree. It sounds like OP has not heard of the MAGA-rena or seen the Trump dance on social media. On social media, if one is right of center …. it feels like 8pm on Christmas Eve played to “Thunderstruck” by AC/DC.
obviously if one lives in Alexandria, VA and watches MSNBC, it’s 100% different.
the amount of election-inspired content swirling on social media is fascinating from an academic-sociological aspect.
but these people are “too deplorable” to consume their media/have empathy for….i guess
https://www.tiktok.com/@trumpsear24/video/7431698959619444011?
https://www.tiktok.com/@mr.holisticmd/video/7431551403061120287?
https://knowyourmeme.com/editorials/guides/why-is-a-trump-macarena-remix-going-viral-on-tiktok-the-magarena-song-explained–2
https://knowyourmeme.com/memes/trumps-ymca-dance
https://knowyourmeme.com/memes/theyre-eating-the-dogs
When I was a young adult the USA was quite something, if say you wanted a new phone line in your house, the phone company would be there the next day and install it, easy-peasy compared to Italy where it might take years to get ‘R done, and then crept a tiny digital spider and made landlines old hat.
We tried to go metric (we were told when 10 that it would replace inches, feet & yards, but we pulled a Milli-Vanish-illi and gave up the ghost, liter ally) but no chance and it was a dead issue by the 80’s.
It isn’t as if there aren’t other countries that are allied with us in our quest to thrust our heads in the sand similar to an ostrich, and we’re lucky to have Burma & Liberia along.
Every other one of our peer countries got rid of the smallest coins but not us. It makes no sense to make Cents as they cost almost 2x the face value to mint, but the zinc lobby calls the shots, money prevails again!
Nickels are even a dumber proposition-for despite the name, they are 75% copper and as unneeded as the lowly Cent, but also use up a valuable resource in the bargain, coming in at double the face value to produce.
Having really no railway system to speak of, and much of the old railbed intact you’d think we’d have a national program to modernize it to China’s standards, but we can’t even build a choo-choo from Chinatown in LA to Chinatown in SF.
The society can use a cent or a nickel thousands of times before it wears out physically and can’t be used as money anymore. Amortize the cost it takes to make one cent or one nickel over the thousands of times that it is used and each use “costs” only a thousandth of a percent of its “face value” for each use. Same for a quarter or a dime or a “fern” ( federal reserve note).
Confusing the thousands-of-times use value of a coin or a bill with its physical cost to make seems like a category error to me.
( If I don’t properly understand the concept of “category error”, perhaps someone will correct me in the nicest possible way, hopefully).
Rule # 3: They think their gaslighting works, shame on them.
What Lincoln (?) said about fooling people.
In yesterday’s Watercooler I was rather dismissive of the over the top emotionality and apparent psychological dysfunction being displayed by politicians, their partisan activists, and large portions of the general population:
I finished with the observation: “Not that there isn’t real desperation out there. It’s just that most of it so far as the MSM is concerned is of the quiet sort.”
Thank you Naked Capitalism for so comprehensively saying the quiet part out loud.
*Sigh*
S&Ls were specialized mortgage lenders created under New Deal legislation:
The “low-cost financing” feature, from the inception of the industry, resulted in home prices being higher than they would otherwise have been. Again, this was a POLICY decision.
The S&Ls, which issued 30 year fixed rate mortgages (for the most part) and financed short, hemorrhaged losses in the high interest rate environment of the 1970s. But rather than restructure the industry early in the 1980s, the Feds instead tried what amounted to a combo of kick the can and extend and pretend. This resulted in abuses, chronicled at length by Bill Black, in his book The Best Way to Rob a Bank is to Own One, which made the problem much much worse in the end.
Again the root was real estate lending and ownership favoring policy, and doubling down on it when lax lending became too common.
As for subprime, we wrote an entire book about the financial crisis. The root was bad economic theory, which led to deregulation and what was actually a derivatives, not a housing, crisis. The potential losses to financial firms from subprime were 4-6x real economy losses due to derivatives greatly exceeding the value of the actual real estate. The derivatives strategies in the toxic phase were driving the creation of particularly bad loans. We explained the incentives for the general growth of derivatives and how the relevant ones worked.
Had this only been a housing bubble unwinding, the losses would have been somewhat worse than S&L crisis levels, but not a near death event for the financial system.
But again, a big driver was a policy push to increase homeownership levels. It had been around 62% before the subprime bubble. It rose to an unsustainable 69% right before the crisis.
Some readers want to talk over the fact that there is a huge policy consensus on high homeownership rates that extends well beyond the banking industry. The banks hugely benefit but many parties are driving this train.
It sounds like you’re defending the Banks and Big Finance?
Aren’t they the root cause of Neoliberalism? We need to put their power back into the people’s hands, right?
Thank you for your hard work, Yves!
I was lucky enough to stumble onto an 8% $45 dollar fee simple assumption assumable loan in 1985. We had to come up with a down that got us to the loan balance, but the mid-80’s featured real estate that was flat to depreciating ever so slightly.
I wonder what sort of impact having assumable loans again would have? Seems it only works when housing is not appreciating meteorically.
As to housing shortage— there is a shorage in the ratio of one-owner to one-housing unit.
Too many multiple housing units per one owner?
In the USA homes are a remarkable economic commodity.
Home ownership touted as a “good investment” which implies an increasing price in the future to make the investment good.
But the USA also advocates for affordable housing, implying a price for housing that new buyers can comfortably afford.
One way to satisfy both constraints is to have constantly increasing wages for those hoping to buy homes in the future.
But increasing wages are not there as both parties seem to prefer low wages for workers.
Under capitalism there can’t be any win-win situations. There must always be winners and losers. Government and the mainstream media push the narrative that everyone can be winners if only they apply themselves. This is false and always will be. For home ownership to be a means to wealth accumulation it is necessary for some to be denied home ownership.
FWIW, Gilbert Doctorow noted yesterday that Russian banks are offering an effective annual interest rate of 24% on accounts over 500 Euros.
“why citizens are so unhappy”
Only the ones that eat and are not truly wealthy.
“Punishing Putin” by sanctioning 29% of the world’s grain exports, oil, diesel, farm machinery and most importantly, phosphate fertilizers, is the cause of food inflation, not corporate greed, although that might be an add on.
Trump, unlike Harris, promises to negotiatite the end of the Ukraine proxy war. That, plus the minor detail of not dying in a thermonuclear war caused by that is good enough for me.
Thanks for this post. This sure lines up almost exactly with what I’ve been observing for a long time. But I’ve also come to the conclusion that American elite derangement with regard to foreign policy (or lack of it as seen by endless wars) and disappearance of issues like the “trade imbalance ” (remember that? when we use to want to export more goods than we imported?) to be replaced by “off-shore it all” are also linked to the same internal schism into the rich oligarchs that run America and everybody else. I think even many of the 20% affluent are starting to realize that they too are just more barnacles to be scraped off the ship of state in the next iteration of the rich plundering more from everybody else.
The desire to “export more goods than we import” is Mercantilism, is it not?
Charles Walters at Acres USA used to write about how we ought to balance exports and imports, neither exporting more than we imported or importing more than we exported. And ideally America would be balanced at importing and exporting as little as possible. But that was decades ago, when it still would have been possible with the right policy-supporters conquering government and driving all the wrong-policy supporters out of government ( and every other policy-arena),
Which never happened. And here we are.
Thank you NC for linking to this article. It was very insightful.
I would like to comment on house prices. In Canada house prices have gone up a lot, more than in the US (see graph linked to by CA above), yet we have no substantial private equity in housing and our banks are tightly regulated with rules that disallow most US derivative-type vehicles. The 2008 financial crisis largely missed us until we were hit by the US economic slowdown.
So in Canada it’s not private equity nor financial shenanigans. Yet price increases have been higher than in the US. As a result we too have a serious affordability problem.
I have attributed our house price increases to three reasons: 1-inadequate supply due to reasons that mystify me since we have lots of land and plenty of developers although Covid has played a part recently, 2- lax mortgage lending rules set by the Bank of Canada for a number of years (as noted by Brian Romanchuk at the time) which were tightened somewhat ca.10 years ago, and 3- a remarkable and rapid increase in our population through immigration, especially students and temporary workers. (see https://www.bankofcanada.ca/wp-content/uploads/2023/12/san2023-17.pdf,p.2)
Points 2 and 3 are due to federal government policies. While the FIRE industries (finance, insurance, real estate) are very influential with the federal Liberals it would be an exaggeration to say they control the country. For instance point 3 is now being rolled back due to considerable popular opposition caused by shortages of housing and public services.
Currently we are experiencing a general building boom across the country so perhaps housing supply will get closer to demand fairly soon and prices will stop rising.
WOW! the Parramore article was the jump off for one of the best long form debate i’ve read in a while – point on point – response on response – the engagement of Yves – and thank you Yves for the deeper understandings of the intricacies of a subtly passive ad hominen argument – over half way through the comments and had to comment before reading further – feel like i’m being AP schooled in the rational manner of debate – it’s like watching the Oxford debates with George Galloway, an excellent debater – confess a humility to engage in comments when they become more interesting than the article that instigated – thank you –
“Voters are fed up with a system that churns out candidates who offer little more than empty slogans and theatrical performances.”
Are they really though? They’re voting for Trump.