“Turning point” is a figure of speech, not a mathematically precise concept.
I wish I could show you the training areas I saw in Europe. There’s this place Hitler created for training his tank division during WW2 — Grafenwöhr. His predecessors had used the area before, draining off a large swamp. The result was a massive bowl with high ridges all around. Hitler shipped in boatloads of sand to make parts of it resemble desert terrain. Today, NATO units still train crews of tanks and other large weapons systems there. You’d be amazed at what a single tank company can do to the ground when they decide to change directions. The modern Abrams tank weighs over 60 tons empty, and the tracks are very wide. It would be a major physical challenge to cross the resulting mess on foot.
Most “turning points” are actually big sloppy areas. The burial of Pompeii under the ash of Vesuvius took all day. The Fall of Rome took years. The Battle of Thermopylae took three days, but the larger action was a full week. There are some truly sudden full catastrophes, but they are vastly outnumbered by slow ones that drag on forever in the consciousness of those directly involved. What we face as the West declines into oblivion is a long, slow process. Forget all the dramatic crap you see in movies. It will be painful all the way, so get used to it. And once this thing is “done” by any measure, it will hardly mean hellish misery for everyone involved.
There is a core group of international bankers who have been herding national governments into massive overspending. At the same time, they’ve been doing the same thing to consumers through various intermediaries. They control a vast amount of debt obligations. The process has been deliberately aimed at enslaving humanity. It can’t be done suddenly; it’s not quite finished yet. But they may be satisfied with the results nonetheless. They are surely aware this will cause most economies to collapse in a certain sense. I doubt they are concerned in the least, though I also doubt it’s their direct intent. Rather, they are taking advantage of a system their predecessors helped to create. Having pushed it this far, there’s no reason to change. They aren’t nearly so coordinated as popularly imagined. It’s a simple matter they all play the same greedy game so long as it seems they can win.
The system presumes something not at all certain — that there will always be some recognized authority in place to enforce the debt obligation. While I admit it’s been a good bet so far, you can’t forget Iceland. The Icelanders have one magnificent advantage: Their government is very close to the people. The place is small and so is the population. Most of the world is bound up in vast imperial governments. These are all subject to fragmentation whenever the central control weakens beyond a certain point. Even as I write this, The Powers That Be are struggling to cement their control, while the entire system is cracking apart. So the likelihood that the international bankers can keep their economic debt control alive is fading at the very climax of their power. In the past few weeks, several of the fifty states have defiantly passed laws that bind their agencies to actively fight federal mandates, mandates which most certainly do reflect the wishes of the bankers. While much of what we see publicly is noise and smoke, it reflects a very real breaking point. Notice this “point” is quite large, though. In truth, it’s not a point, but a highly variable threshold that constantly moves.
That’s because it involves people — millions of people. What makes the Social Sciences so utterly fascinating is this very lack of precision. It’s as much art as science to guess what will happen next. It has nothing do with what I feel or what you feel; it has to do with so many factors that no human mind can possibly track them all. Even when we have the concrete evidence before us, it’s not scientifically certain what it means. We all see it differently. So on any given day, on any given hour, some critical mass of ordinary people may well panic and the whole thing comes down. Even then, it’s not certain whether the stampede really changed much.
Populist predictions of cataclysm do hold a grain of truth, but if you read into it all the drama and special effects from recent movies, you’ll end up very disappointed. Those movies and video games are so entertaining in part because they bear little resemblance to reality. The sweet spot between clearly fantastic and approximately real is also highly variable, so the business of virtual reality gaming and video entertainment will ever be more art than science.
Yes, things are changing. Expect it to more resemble a tank brigade turn-around than a running back’s pivot on the playing field.
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I agree with the concept that an optimum economy is about the size of France. Having a contained economy that is 500 miles by 500 miles makes the transportation costs of people and goods reasonable, and the relative closeness (everything is a day’s drive) allows a nimbleness and agility for the economy to respond to the natural changes that occur.
No matter how large an economy (geography) is, it needs a stable banking system. A rational banking system provides for housing stability, credit availability for small business and a means of education financing. (There is a role in society for “weird” finance – ranging from venture capital all the way down to pawnshops and payday loans, but all the players know the risks and rewards, and this is a small part of “banking”)
The economic geography of large cities involve various forms of residence. Young singles often prefer to live in the cities, while older, and married folks prefer suburbs of primarily detached homes. The economics of suburbs are driven by two factors. One is that generally the best schools are found in the suburbs, and, for admission to the best colleges, kids, for the most part, need to live in those suburbs. The second factor is that home ownership is a savings tool – a thirty year piggy bank forming the basis of retirement. As major metro areas grow, outer suburbs are established, and inner suburbs increase in value. Part of the value of a house is the inherent cost of construction, part is the value of the school district nearby, and part is the closeness to the metro core. This tends to make houses increase in cost at a rate greater than inflation.
In order for this to work well, a metro area needs good transportation. Four elements are critical. One is a good subway that allows getting around the core without being stuck in traffic, or hunting for a parking space. The second is an extensive, safe and reliable bus system. The third is a good commuter rail system, connecting the suburbs to the core. The fourth is extensive parking near the suburban stations – especially the end points in the suburbs. Only about a dozen metro areas in the US are big enough for all four, and most of those do well.
The core cities also have home ownership, which is a mix of houses and condos. Forced stability is not as critical, since the ready availability of apartments provides a benchmark of value. But stability assures accessibility. And accessibility means quality. One important factor is to realize who owns the apartment buildings in a big city. Naturally, one thinks of various private corporations – ranging from “slumlord” to a dozen dentists forming a Subchapter-S corporation owning an upscale twenty unit property. But reality is that almost everything with more than four units is owned by some kind of pension fund – essentially it is owned by “you”.
“Welterweight” cities have been in the news – the Stocktons that have gone bankrupt. Cities this size have three great advantages. One is they are cheap to live in. The second is that housing is inexpensive. Since any builder can buy a farm at the edge of town and put up a hundred houses, the cost of housing is pretty much based on the cost of construction. All the houses in Stockton are no more than five miles from all the jobs in Stockton. The third advantage is that small cities are a pathway out of poverty. Emergence from poverty requires accountability, and it’s hard to hide in Stockton. Freeloaders and panhandlers abound in San Francisco, which poisons the attitude toward the worthy poor. But, in a small city, word gets around quickly.
Small cities provide decent jobs that don’t require a degree. Manufacturing is easier than in a big city, and manufacturing jobs are good ones. The nature of manufacturing is shift work, and this makes for a bus connection. A well planned and zoned city can have most of the residences and services along half a dozen corridors, making transportation cheap.
Given the ready availability of land, and the availability of a plethora of construction workers, there is no good reason why a city like Stockton would have a housing bubble. It is pure financial trickery that houses went up 70 percent in one year. For this reason, the whole process of issuing mortgages, packaging those loans into securities, and putting those securities into the national marketplace should be done as locally as possible. The process is no more complicated than running a credit union. I would envision a regional entity (covering a population of 10 million) handling this. Large states like Texas and California would have three or four of these entities, while smaller states would pair up for one entity covering both states. Like a credit union, a cut-and-dried system, no robosigning, no liar loans, no 125 percent; strictly a mix of 5-10-20 percent down mortgages. And the federal government stays out of it, simply providing a guarantee for VA and FHA loans (not a handout – but this is the subject for another discussion).
One of the challenges to financial stability in a region is crime. Smaller cities are better at rehabilitating criminals. It is very common for commuters (and for that matter, subway riders) to travel to work past high crime neighborhoods. Nowadays, a misdemeanor, or a felony is something that bars a person from certain jobs. A better method might be a system of a dozen steps, that would bar a minor criminal from certain areas, and, criminals with greater records would be barred from greater areas. Hard core criminals would not be allowed in major metros at all. Of course, this benefits the major metro, and puts a cost on the smaller cities, which should be borne by the residents of the major metros.
A great deal of the wealth of the citizens of this country is based on real estate, and keeping the feds out of that pot, both from the banking system, and legislating from the bench (crime and prison costs) is essential.
Excellent summary, Mike, of what ought to be. Wish we could get that, but I regard the system as too far gone to come back such sanity. We’ll have to pass through some really ugly stuff first.