See you in Brazil.
It’s interesting that the property markets in the the USA are dominated to a great extent by the drive to sell cheap stuff in Detroit and Florida.
I dont want to talk about Florida, which is a confusing enough place without me adding to the background noise, but Detroit is an interesting case study.
We are being told that Detroit is cheap. Detroit is going to be saved by the government. Detroit is going to get zillions in aid. Detroit is about to be regenerated.
It’s odd, but haven’t I heard all this before? I vaguely remember going to Detroit forty years ago. It was in the throes of being saved by the government, getting zillions in aid, and was in the process of being regenerated.
Hands up those who remember President Johnson’s Model Cities Program? Hmm, not many. It was supposed to be a great experiment in urban planning aimed at improving the lot of black folks in the city.
About half a trillion dollars was poured into the city. Over the next two years a quarter of a million folk moved out, and Detroit started its long decline. Over the last forty odd years Detroit has lost about half its population.
Over a thirtyfive year period it seems the Model City area lost 63% of its population and 45% of its housing units. The place is in fact a model disaster area.
There is a little saying about learning from one’s mistakes. However, no-one mentions what it is that one learns from one’s mistakes. I vividly remember my cousin’s mistakes. I dont want to slag off poor Jeremy. He’s a nice guy, and his mistakes were thoroughly understandable, but his kind of mistake is just what we are all up against at the moment.
Jen was a radio ham. He was seriously into short wave radio, and had masses of gear. He used to subscribe to the right magazines, and used their instructions to build his own radio equipment. Invariably the machines didn’t work. However, he learned from his mistakes. He built bigger machines. They didn’t work either.
One day the penny dropped, and he actually admitted to me that his machines never worked because he just kept trying to make them bigger. I have never come across a politician who admitted a similar mistake.
Central planning didn’t work in Detroit. Okay, tough shit. We’ll make it work this time by spending more money and making everything bigger.
Okay, so it doesn’t work this time, so next time we’ll have to try even harder and spend even more money. No-one seems to get the message that the schemes simply dont work. Making them bigger only makes a bigger mess.
Welcome to the latest spend-out in Detroit. My guess is things are about to get a lot lot worse.
There seems to be a lot of it about. We have similar problems in Europe. There is a problem with little old Greece. The Greeks are bust. Now, let’s count, how many times have they gone bust since independence? Is it ten times, twelve times? I dont know. I forget. They are so regularly bust one cant keep up.
Economically they represent 3% of the eurozone. However, the governments of the eurozone are there to help. They have just pulled out a stupendous amount of money to save 3% of the zone, and in the process, put the whole zone in jeopardy, and so the euro tanks at an alarming rate as more and more businessmen lose trust in the currency, and decide to sell their goods by using alternative currencies. After all, who wants to be paid in three months time an amount which is now 5% less than it was when you signed the contract?
More to the point, who wants to use a currency which supports a country which has been on the fiddle for the past decade. All fiat currencies are paper based. Paper is not worth a lot. The value of paper money is based on trust. Support those who fiddle, and trust goes out the window.
There is a promise on sterling notes. “I promise to pay the bearer the sum of…..” and that promise is signed by the governor of the Bank of England. I dont reckon that promise is worth too much, but it is there, and there is a Bank of England, and a governor. And despite the idiocy of Gordon Brown the UK does still have a few gold bars somewhere in the vaults.
On the other hand, if you get out a euro note you’ll find there’s nothing there. It’s just a bit of paper which is worth what people think it’s worth. In times of crisis, that isn’t going to be much. After all, we dont even know who issued the note. It is a piece of paper backed by a dream.
So, once again, we have a small problem which has been turned into a huge problem by government trying to make things better.
If the wise man does learn by his mistakes, the question is: where is a wise person to be found?
The next question is: will there be a eurozone in five years’ time, and if so, what will it look like?
The third, and most alarming question is: what will there be in those countries where there is no longer a euro? What will their puny little currencies be worth? And what will the local houses then be worth?
See you in Brazil.