Time to Raze America?

There are some alarming if not perhaps anecdotal trends and memes shaping up on the American landscape - and I think there is one that will have direct effect on the real landscape - and that is worthless housing (to be followed by worthless retail space). America, and the thousand of communities that make up America, needs a real plan for the future in places like Flint, Michigan and other cities where the homes are crumbling, the economy has crumbled, and there is probably not any good solution other than tearing things down. How we as a nation deal with this challenge will be a real test. Perception and reality -of home, work, community, neighborhood - have to change in America. I hope we as a nation can make it through to the other side.

A couple of examples:

Banks Starting to Walk Away on Foreclosures - after being foreclosed on, the bank suspends the sheriff's sale, and now this worthless property is the responsibility of the owner again.

Off-the-cuff suggestion prompts discussion on what to do with abandoned neighborhoods in Flint:

Property abandonment is getting so bad in Flint that some in government are talking about an extreme measure that was once unthinkable -- shutting down portions of the city, officially abandoning them and cutting off police and fire service.

There are no easy answers to these issues. These people are all going to need help - financial and physical (as in moving, etc.). Unfortunately the "right" is going to cry socialism or Marxism at every chance they get, but if tax dollars are not spent on these issues, then what else is there to do? Abandon your citizens? Fuel despair and poverty until there are starving looters running through the streets? I hope somewhere in the federal, state, and local governments people are working on plans for these issues.

Ping Pong

Stereolab sums it up:

it's alright 'cos the historical pattern has shown
how the economical cycle tends to revolve
in a round of decades three stages stand out in a loop
a slump and war then peel back to square one and back for more

bigger slump and bigger wars and a smaller recovery
huger slump and greater wars and a shallower recovery

you see the recovery always comes 'round again
there's nothing to worry for things will look after themselves
it's alright recovery always comes 'round again
there's nothing to worry if things can only get better

there's only millions that lose their jobs and homes and sometimes accents
there's only millions that die in their bloody wars, it's alright

it's only their lives and the lives of their next of kin that they are losing
it's only their lives and the lives of their next of kin that they are losing

it's alright 'cos the historical pattern has shown
how the economical cycle tends to revolve
in a round of decades three stages stand out in a loop
a slump and war then peel back to square one and back for more

bigger slump and bigger wars and a smaller recovery
huger slump and greater wars and a shallower recovery

don't worry be happy things will get better naturally
don't worry shut up sit down go with it and be happy

dum, dum, dum, de dum dum, de duh de duh de dum dum dum... ah ah
dum, dum, dum, de dum dum, de duh de duh de dum dum dum... ah ah

D.I.Y.

This is definitely going to be a growing trend - and I hope it will have long lasting benefits for American society as a whole - even if the short term affect is negative to some of the people providing these services:

A few months ago, as her family’s income fell, Laura French Spada, a real estate agent in Glen Rock, N.J., began dyeing her hair at home and washing the family cars herself. Her husband, Mark, started learning how to do electrical repairs.

Susan Todoroff, a personal trainer in Ann Arbor, Mich., has begun brewing espressos at home and cutting her hair and cleaning her house herself. And Tamar A. Zaidenweber, a health care market researcher in Astoria, Queens, is spending more time walking her dog instead of taking it to day care each week.

All of these consumers could praise themselves for their newfound frugality in the midst of an economic downturn. But every step they take toward self-reliance — each shrub they prune themselves, each cupcake they bake from scratch — hurts the people and small businesses that have long provided these services professionally.

Getting back to doing things for yourself, realizing that every "free" moment isn't about shopping, vacationing, gambling, getting drunk and watching TV, while paying someone else to do the little things in life for you that actually make up real life - I think this is an important step for Americans to take and perhaps a longer term silver lining in this economic disaster.

If you're not scared yet...

... you must be in a coma. The wheels are coming off this thing - and this is after the bailout has begun!

A Sea of Unwanted Imports:

And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.

"This is one way to look at the economy,” Art Wong, a spokesman for the port, said of the cars. “And it scares you to death."

Consumer Prices Fall by Record Amount:

"This month it's more than slowing, it's outright contraction," said James O'Sullivan, United States economist at UBS. "And yes, if you extrapolate that, it's deflation."

The heart of the matter

Largely because of what Mr. Hanson called the “widespread creation of wealth,” the number of domestic hotel rooms in the luxury segment almost doubled, to more than 80,000, in the last 10 years, according to Smith Travel Research. At the same time, luxury hotel companies were also planting their flags in every major city in the world.

Is this true? Was there really a “widespread creation of wealth,” - or was most of the world just involved in the biggest Ponzi scheme (Credit Default Swaps, etc.) ever for the last ten years? Unfortunately I think it was the latter. The excess capacity of luxury hotel rooms, luxury real estate, luxury retail stores, etc. (brought on by the former enormous excess of credit) will probably all have to be worked off in the coming years, and it could be a long and ugly time economically (and literally) as this happens.

Mortgage Equity Withdrawal

Graph courtesy of the fantastic Calculated Risk. What can you say about this chart? How about one word - RECESSION.

Oh my god you are so naive!

Get the latest news satire and funny videos at 236.com.

WTF

... is wrong with these people:

Senator Mitch McConnell of Kentucky, the Republican leader, quickly went to the Senate floor and declared Mr. McCain’s proposal "an outstanding idea."

An outstanding idea? McCain has no clue what is going on. His stunt of suspending his campaign is just that - a cheap stunt to try to get out of the debates, especially the VP debate. But McConnell is just warming up:

“Americans want to know that their home values and college funds and retirement accounts are safe. In other words, that the problems on Wall Street are not going to spread to Main Street. So I appreciate my colleague’s proposal and I hope that it is given serious consideration.”

Hey Senator, the problem is on main street, i.e. record foreclosures - and is headed back to Wall Street in the form of MBS and other toxic paper they invented - to supposedly avoid the very such problems they are in - not the other way around.

Do they just let anybody who is rich become a senator?

The financial markets are working

Knowing that there is nothing this administration won't try, you really have to start to wonder about this plan's timing. Did Paulson really think he could make Chuck Schumer crap himself and sign over a trillion dollars over a weekend?

The plan as it emerges is terrible - it is simply a bailout of the people/institutions holding these MBSs and other pieces of toxic paper.

I have a pretty plain observation about the whole mess - the financial markets are working - not melting down. Credit is tighter, the TED spread is exploding, treasury yields are low, etc. etc. because the market - the market in, of, and for these things - knows that there is no "there" there. There is no credit to be offered, because there are no assets to back it up. The market is trying to tell people to stop borrowing - this is exactly what it is supposed to be doing.

Let the housing market come to rest where it should, let thousands of housing starts stop, let hundreds or thousand of CRE developments grind to a halt, let unemployment rise - and let these banks/brokerages/hedge funds/etc. fail if they have to. They made the mess - they invented it, participated in it, feed slovenly from the trough of it. And when it still wasn't enough, they forced the game all the way down to the lowest of consumers and convinced damn near everyone in the entire United States that they had to own a home (or two or three) and two cars and a 60 inch TV, etc. etc. and that we could all just pay for everything later.

Well you can't. You can't leverage everything up 30 times - it just doesn't work. This has just been proven - and all this bailout seems to want to do is to return things to the way they were a couple of years ago. Instead of seeing the housing market as a bubble, Paulson is talking about a housing recovery. What recovery? Is he insane?

Some links:

Pigs at the Trough TPM

Getting real — and letting the cat out of the bag Krugman

The Bailout

The new bailout as it stands this morning is a crock of crap. This is not a liquidity crisis - it is a solvency crisis. Wall Street is about to be bailed out by the taxpayer, plain and simple. More of these institutions should be allowed to fail. Home prices should adjust to where they have to on their own. When I hear Paulson talk about a housing "recovery" it shakes me to the bone. There is no recovery coming. There was a bubble, it burst, get over it. The fact that there are so many lucid comments all over the web, but that none of those quotes are coming from the government should tell you something. Here are a couple:

Cash for Trash from Paul Krugman:

"Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us."

From a commenter on TPM:

"As a Wall Street guy I am sort of glad that this bailout is being organized. However, what seems unfair to me is that there are absolutely no provisions for homeowners. Moreover, this morning on Stephanopulous I saw Hank Paulson talking about homeowners taking out mortgages that were higher than they could afford and about them needing to live up to their obligations.

I find it incredible that he would use language like that while asking taxpayers to send a trillion dollars to Wall Street because investment banks made irresponsible investments and aren't able to live up to their obligations."

And whatever your opinion of Shedlock at Global Economic Trend Analysis, he has been all over this mess forever. As has Calculated Risk.