Ignorance is bliss! - Creating A World Of Calm Serenity

Let Us Declare This As The Truth!

As we look around it is not difficult to understand the origin of the saying "Ignorance is bliss!" This article is a tribute to all those cute little sayings and witticisms that have laced their way through our culture and give depth to our vocabulary. While I will only highlight a few it should be noted that many more exist and they and often the result of generations of tried and true lessons pounded into the collective heads of mankind. Now back to the title of this article, "Ignorance is bliss!"  The lyrics from a song that was popular years ago indicated that "things get a little easier once you understand." Sadly this is not always true and sometimes understanding an issue only reveals the complexity hidden under the surface.

This Chart Is Scientific Proof The Link Exist

Statistics show that in recent years many Americans have dropped out of the workforce and are retiring early and it is not because they are rich but because they can. Like many people, I often think about just giving up and chucking it all. Oh, how sweet it must be to know little of the risk and hazards that surround us and to be totally oblivious as to the dangers lurking around every corner. Envision the joy of living in a state of mind that allows you to awake each day to a world of calm serenity.  The chart to the left proves and shows without any doubt the scientific correlation between ignorance and happiness does exist. This explains a lot about life and leaves little doubt as to the benefits of a lazy mind.

A Reassuring Lie Has Many Fans

It is often hard to quantify just how intelligent the masses are but, it is safe to say many people could not qualify as a rocket scientist. I strongly suggest it is not by accident the phrase "an inconvenient truth" came about or that "da Nile" is not only a river in Egypt.  Denial is a place or state where many people live out much of their life. Truth often has a sharp edge to it and is unbending which makes it rather exhausting to tolerate. This means it is often not very reassuring to question what we are told and far easier to go with the flow or accept the general consensus that the person you are following actually knows where they are going.

An Ugly Reality Can Lurk Just Below The Surface

Some of the drawbacks related to pursuing knowledge alluded to above may be only the tip of the iceberg in explaining why so many people choose the well-traveled path of being happy with what is, rather than thinking about what could be. I salute those who pick to live their life in a place where the color of the sky is of their choosing. The only problem with choosing the path of ignorance is the possibility that the illusion might collapse at any time if reality chooses to raise its ugly head. My research, however, indicates that a few witticisms have been created to cover even those situations, such as, "Don't worry be happy!"

We live in a world where Goldman Sachs is busy claiming to be doing God's work and a broad swath of mainstream media claims to be standing upon the moral high ground while spinning the news to suit their needs. Considering this it is hard to find a good anchor. Nowhere to be seen on CNBC, Bloomberg, the WSJ, or any other status quo propaganda media outlet is much that resembles honest or thoughtful information. Their job is not to analyze or seek the truth. Their job is to keep their government patrons and Wall Street advertisers happy while keeping the masses sedated, misinformed, and pliable.

After years of economic propaganda, artificially inflated stock prices, dishonest accounting, laced with pandering and outright lies we find Washington and the media have hollowed out our culture lulling most unsuspecting Americans to sleep. The rest of the world has not fared any better. Few among us no matter how dumb or how dense think the world would not be better off if they were in charge and calling the shots as ruler supreme. One thing is very clear, the issues a person would make their priorities if they held such a station of power speaks volumes as to what they value and what they hold dear.

I must say this article has been in the works for longer than you might imagine and was quite challenging to write. It takes a great deal of effort to put together such a profound piece of drivel and I hope I got the balance right. I find both solace and comfort in the idea that I'm not nearly as stupid as many of the people who occupy this world. Thank goodness the bar has been set so low because it creates a situation where it becomes much easier to compete. Sadly, this double edge sword leaves us living among people that are not too bright and unburdened by the worry of reality. I must admit it is rather ironic we who claim to see the bigger picture often envy their happiness?
                                                                         
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As a final thought to ponder below is a link to; Always Look on the Bright Side of Life - Monty Python's Life of Brian  
                             https://www.youtube.com/watch?v=SJUhlRoBL8M

China's "Postal Rate Break" Feeds Into Fair Trade Issue!

Sewing Needles On E-bay For $0.99

The landscape of retailing in America can take us down an interesting path when buying something as simple as a needle and some thread to sew on a button. Most of us have not purchased a simple needle and thread for a long time, maybe decades, maybe never. These are not expensive articles to manufacture but what is shocking is that you can buy them cheaper from a company in China and have them shipped directly to your home for far less than you can buy them here in America. The question is how or why. The needles pictured on the right can be bought online from a seller in China for $0.99 or $3.99 from a seller based in "LA, United States" at your local store you pay around $5. This means local stores here in America can’t compete which results in more retail jobs disappearing or just hanging on with lower pay and benefits being reduced. Also when foreign online sellers pluck a sale away from American brick and mortar stores they are not collecting or paying any sales tax or income tax like importers located in the USA. 

Companies have repeatedly pointed out the rates that have been set by the United Nations Universal Postal Union or UPU currently allow a small package to be shipped to a customer in America from China for far less than it can be shipped across town. Reuters reports that the U.S. State Department said it would push for foreign postal carriers to pay the U.S. Postal Service more to deliver small parcels within the United States. It added that if insufficient progress is made with the UPU the U.S. Secretary of State will make recommendations for future action which would likely include adopting self-declared rates. The rates have been a longtime issue and a source of complaints from UPS, many American companies shipping here in the states and even Amazon.  They have rightfully claimed that because they give foreign companies a huge advantage in pricing they are unfair and harm American businesses. 

In the latter part of 2016, the National Review ran a piece calling for America to stop subsidizing foreign postal systems for both economic fairness and national security. It stated the Postal Regulatory Commission was slated to determine whether the new proposed rules of the UPU were consistent with the mission of the U.S. Postal Service. While it is difficult to find what was decided or how anything has yet to change the article made it clear what the commission decided could go a long way in either making us all safer and more secure.  Currently, the international postal-package system enables terrorists, drug dealers, and Chinese e-commerce companies to abuse us at our expense. A big problem here is the proposed new rules mirror the old rules with a few minor changes meant to mollify the growing number of critics here in America.

Under the current rules set by the UPU, the charges the USPS is allowed to charge foreign postal services to deliver packages they send into America (called terminal dues) are set ludicrously low for certain countries, among them China. Under UPU rules China, the world’s second-largest economy currently enjoys the same break on terminal dues as do Gabon and Botswana. This means that the USPS actually charges China's post office less to deliver a package from China into the U.S. than it charges a U.S. business or customer to deliver a similar size package within the 48 states. The post office is losing money on every package it delivers from China and then has to pass the cost on to its American customers and U.S. taxpayers.

Adding to the insanity of working under the rules set by the UPU the USPS is compelled to deliver all packages from foreign sources even if they have not passed any customs inspection, and even if the post office has no information about what the package contains or where it originated. This means under UPU rules, our post office has become a mule for international drug traffickers. As the traffic in international postal packages has exploded in the past decade due to e-commerce, so too has the ability of drug traffickers to flood the U.S. and the world’s postal systems with packages containing flakka, fentanyl, and other drugs. Again, much of this is flowing out of China. This is not just a gift to the world’s drug dealers but opens the possibility that terrorists could also exploit this flaw in security.

Why this has gone on for so long is disturbing but President Donald Trump issued a memorandum on "terminal dues," or rates one country's postal service pays another for finishing an international delivery and the State Department has finally signaled changes are necessary. Trump's memo states, "The current system of terminal dues distorts the flow of small packages around the world by incentivizing the shipping of goods from foreign countries that benefit from artificially low reimbursement rates," It is not clear if this memorandum is tied to recommendations, not yet made public, of the postal task force Trump set up this year to examine USPS's business and linked to a study of the low delivery rates Amazon currently enjoys.

The bottom-line is the UPU doesn’t care whether its rules pose a threat to the U.S.or other countries but internal postal regulatory commissions should. America should rapidly move to declare the UPU status quo isn’t consistent with the mission of the USPS in terms of postal rates and preserving our economy, our health, and our national security. Such a ruling would no doubt set off a firestorm at the UPU and within the U.S. State Department which has until now largely turned a blind eye to the dangers inherent in the international parcel-post system, for fear of creating a diplomatic brouhaha but it is the right thing to do.

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Footnote;  With Amazon, this has little to do with fairness. The desire to see the rates foreign shippers pay increased is so they would be forced to ship through its Amazon fulfillment centers. Other posts that relate to this article can be found below.
 http://brucewilds.blogspot.com/2018/07/amazom-shipping-rates-deemed-to-low-too.html
 http://brucewilds.blogspot.com/2017/11/nafta-let-us-favor-regional-trade-over.html
 http://Free Trade And Fair Trade Are Very Different.html

"Job Friday" Highlights The Role Of Jobs In The Economy

The first Friday of each month is typically the day when the BLS releases its latest jobs report that is watched closely by economists and investors. The report is seen as a key indicator of whether the American economy is on track and where it is headed. Within the numbers are subtle reminders that Americans don't just want jobs, they want "good jobs" and this means full-time work that pays well and has benefits. Today few occupations are totally secure from the wave of labor-saving technology currently in the pipeline. This means it is the job of those we have sent to Washington to create or paint a vision that shows how America can integrate labor-saving devices into a job-creating bonanza or at least an economy that is sustainable going forward.

Amazon Moving Rapidly To A Robot Work Force

Many Americans feel Washington has failed in some way or another to protect jobs. For decades policies have allowed or even encouraged manufacturing jobs to leave the country. Recent reports make it increasingly clear that automation is not going away and minimum wage policies only accelerate and drive the trend of replacing expensive human workers with robots. Amazon the behemoth retailer known for cutting prices and exploiting brick and mortar retailers often boast of its cost-saving move to utilize more robots and cut human jobs. The fact that last year more than 7,000 stores closed their doors, more than twice the amount of stores that opened in the same time period is not a reassuring sign.

Several new technologies headed in our direction scream more economic disruption ahead. One writer I follow has pointed out on more than one occasion how self-driving vehicles is a game changer. Self-driving semi rigs able to safely maneuver and fill the nations interstate highways during the night when traffic is light will reduce daytime congestion but also greatly reduce the number of people paid to drive these vehicles, this is a major occupation that pays relatively well. The ramifications of self-driving vehicles will extend into areas such as taxi jobs and potentially change the relationship most American's have with their automobile a mainstay of modern life in this country. Imagine not having to own a car or reducing the number of automobiles in your family because a safe and secure ride is available at the push of a button.
 
The fact is in my area while we continue to hear about unemployment at sixteen-year lows many people remain underemployed and are struggling. The average American has good reason to worry not only about their job but the future opportunities available for their children. Let me make it clear, robots taking our jobs will bode poorly for the huge majority of society. The idea that those ultimately left with the decision as to how to divide the economic pie will be generous or fair is a little naive. History shows the ruling class tends to tilt the rules in their favor. Soaring economic inequality is already a major issue and the divide is most likely going to grow ever wider. When it is pointed out that entitlements are about to explode the deficit in coming years logic dictates the nation can no longer delay addressing this issue. While very important to voters creating good quality sustainable jobs is an area where Washington has failed to excel. 

Is A Robot Coming For Your Job?

Without jobs a glimpse into the future becomes very grim. The fear of being replaced by a robot or seeing your job being outsourced or eliminated is on the rise. Rest assured when push comes to shove those displaced from the job market are only able to scrape by will find they are only given enough to ensure they remain docile and behave. If it ever comes to the point where these people hit the streets in angry protest it is very likely they will be beaten into submission for the greater good, possibly by robots given the task to restore civil order. It should be pointed out that going forward those on the government dole or a guaranteed income may find they are at the mercy of a system where at any time benefits are canceled or cut.

Tied into Trump's solution to create new jobs and energize America's economy is the strong message that we must demand from other nations fairer trade policies that level the playing field. We cannot compete when other nations pay their workers little, degrade the environment, and often subsidize exports in various ways. This is a stand Trump shares with Bernie Sanders.  Like many backseat political strategist, I have grown weary of politicians failing to fulfill their promises or for that matter accomplishing much of anything. Even while we are told unemployment is at a sixteen year low and we hear companies are clamoring for workers something is definitely wrong and a series of polls indicate that a focus on job creation and the economy is where the attention of those in Washington should be.

After facing decades of stagnating or falling wages after adjusting for inflation it is little wonder why the average American feels insecure or downright betrayed. This was why many people voted for Trump, as a businessman they hoped he would have a strong real-life advantage over politicians in understanding how to create jobs. To be great a country must be economically strong. The key to any policy geared to creating jobs is getting the foot of government off the neck of small business. This means reducing the regulations strangling the nations most vibrant creator of jobs and where workers gain valuable work skills is a must. Tax reform and laws governing business must reduce the advantages mere size gives big business and its ability to destroy competition by mass alone. As it is big business will benefit most by adopting more automation and robot workers and this could bode very poorly for most workers and society in general.

Emerging Market Currencies Implode - Transfer Wealth

Iranians Stand In Line Waiting To Exchange Currency

In several emerging market countries currencies are imploding and people are in total panic. This is because in what seems a blink of an eye they are seeing years of savings become worthless or vanishing into the deep hole of inflation. This is because when a currency implodes or fails, wealth is transferred from those improperly invested to survive such an event to those positioned to benefit. A key reason inflation has remained so low since 2008 and during a time central banks have tried to paper over problems by expanding the money supply is because people have been willing to store their wealth in paper instruments. The good people of countries like Argentina, Venezuela, Iran. and Turkey that held on to their country's currency have been financially raped as the currencies have fallen in value. Today they are far less wealthy compared to people in countries that have seen their currencies remain stable.

This can and should be taken as a warning that it is very important where we store the wealth we have accumulated over the years. An article presented to me some time ago delved into the subject of high-earning Americans, where their wealth came from, and just as importantly where it was stored. This got me thinking about the so-called wealth effect as well as how all that wealth was held. The really big earners in recent years have benefited greatly from the surging stock prices as much of their income has come from financial markets and gains in equities. Many people seem to think this is the way things will continue and the hope of our future. When you have more than you need or want to put money away for a rainy day where do you store it? If you rated people on a "wealth chart" by how many tangible assets they owned you might be shocked to find much of the wealth people own is in paper and this can be full of risk. In our world today the possibility of cyber-crime or cyber-theft takes this to even a higher level.

Safely Storing Away Wealth Can Be Difficult!

In many ways "paper wealth" is merely the promise of future value. Unfortunately, this leaves much of society and many rich individuals vulnerable to rapid financial loss if the tides of fortune shift or if values rapidly change. Currently not only are we faced with banks paying little in the way of interest but we must also deal with the fear they or the government might reach in and seize part of our money. This tends to encourage people to pull their money out of banks and other safe investments in search of higher yields we have driven up stock prices. Some of these stocks have reached unbelievable multiples.

The reality is that most people do not understand money and wealth. Myths about both run rampant and become intertwined with deeply rooted personal feelings passed down from parents or acquired. These feeling often muddy and skew how people deal with wealth. An example would be anyone who felt deep down that money was the root of all evil would react to winning the lottery far differently than someone with the belief that you can buy happiness. I have even heard poor people say they didn't see much point in winning a lottery of  several hundred thousand dollars because "that's not much money." When the B word "billions" is so prevalent in society today it is understandable many people live with distorted values. 

Truth be told most people are not overly endowed with discipline this includes many people that amass a fortune. This often means that many wealthy people tend to "misplace" or lose track of where they have placed their wealth. Sometimes it is simply put into a system that is on autopilot. Years ago I purchased a property from a doctor on contract. The doctor having also bought the property on contract had me just send the payments to the man he bought it from so he would not be bothered. After many years I contacted the doctor to discuss a discount for a cash payoff and his accountant discovered the first seller had been paid off years before but continued taking the money he had no right to. The doctor was shocked and getting his money back proved difficult.

Americans Stash Money In Paper Promises  (click to enlarge)

Annuities, pensions, stocks and such promises of future payment tend to dominate the list of favorite vessels in which to store wealth and many of these are leveraged to maximize returns and garner higher yields on our investment. Cash is another option but holding it in your possession leaves one open to theft and means the money will earn no interest. What is often missing or overlooked is tangible fully paid for items and things that are likely to hold their value and in the direct possession of the owner. People tend to avoid tangible assets in their control because they are often inconvenient. Valuables can be a pain to have about and they often need to be insured which also calls attention to their existence.

When you subcontract out control of your wealth or turn it over to a money manager you often get promises but no ironclad guarantee. Confidence in a money manager can quickly be dashed, all the people invested with Bernie Madoff discovered just how suddenly things can go south and promises turn hollow. While it has become both fashionable and common in recent years to let someone else who knows and specializes in financial planning and markets to control this segment of our lives I feel it is a big mistake and a dereliction of duty. Wealth should come with a warning notice saying "Holder Beware This Commodity May Vanish Spoil Or Grow Obsolete At Any Time!"

For some time, I have felt the current trends that have unfolded since interest rates soared in 1979 to halt inflation have become unsustainable. This means that a new reset will have to occur at some point. You can expect promises to be rewritten and broken. Rules will change as we go through the wash. If I'm correct it will be interesting to see how a future reset which is again likely to involve a massive transfer of wealth will affect financial equality as many people see their assets rinsed away as society is put through the wringer.

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r.

Russia Today, The Country - Not The Television Network

This article is focused on giving readers a better understanding of Russia in 2018. It is the second of two articles dealing with how America and the world view Vladimir Putin and what Americans may or may not know about the country that America's "Deep State" continues to consider a major threat. To be perfectly clear it is not just neoconservative Republicans like Marco Rubio and Lindsey Graham but Democrats and liberals are also painting Trump as wrong and misguided when it comes to our policy towards Russia. Fox News, NBC and the Washington Post have been promoting the same hard-line against any notion of normalizing relations with Russia.

One of the things we often forget is that many Americans don't really know very much about Russia or the Russian people and much of what they have been told has been filtered through a national security apparatus so entrenched in a cold war mindset they appear paranoid. Those who want war or are always pounding on the drums of fear endlessly demonize Russia as a major threat to America and our way of life. Some peace-hating beltway stalwarts were so upset about the recent meeting in Helsinki between Donald Trump and Vladimir Putin which they viewed as "peace talks" that they took every opportunity to sabotage them.

It is clear the warmongering faction residing within Washington has declared Russia a major threat and sparked massive media coverage to convince us it is true. An example of what we are facing is revealed in an article published by The Intercept telling how a prominent national security reporter for the Los Angeles Times routinely submitted drafts and detailed summaries of his stories to CIA press handlers prior to publication. Apparently, Ken Dilanian enjoyed a close collaborative relationship with the agency, explicitly promising positive news coverage and sometimes sending entire drafts for review prior to publication. In at least one instance, significant changes were made before the story was published. Documents show reporters for the Associated Press, Washington Post, New York Times, Wall Street Journal, and other outlets also interacting with the agency.

The myth of Russia's strength has been amplified by journalists seeking to routinely curry favor with government sources and others by falsely hyping the official point of view. A read of The Intercept article generates a reason for concern. Another article is even bolder when it states, "The US intelligence community’s job to lie to you." It goes on to detail how two big Russia stories blasted onto the front pages loudly promoting Russia hysteria just days before the Trump-Putin summit were in effect an attempt to sabotage the meeting. The first was that Robert Mueller had issued an indictment of 12 Russians which was rapidly followed by America’s top intelligence officer Dan Coats who replaced Russophobic James Clapper declaring that the warning signs of future Russian cyber-attacks are akin to the warnings received prior to the September 11 attacks. The Washington Post bolstered this narrative with an article titled, “Trump hopes he and Putin will get along. Russia experts worry they will”.

Note Russia's Failure To Appear On List!

Now getting away from what shapes American opinion here are some real facts about Russia. For over half a century economic policy was shaped by the Communist Party and like the rest of the USSR, was centrally planned. The state-controlled virtually all investment, production, and consumption across the country. The transition towards a market economy in the 1990s was painful. The chart on the right shows even today Russia fails to place in the world's top ten largest economies.

• Russia is the 9th most populated country in the world with 144.50 million people in 2017.
• In terms of land area, Russia located across 9 time zones and is the largest country in the world. Russia shares borders with many countries, including China, Ukraine, North Korea and Norway. 
• The official language is Russian but there are 27 other languages co-official in various regions of the country. It is located in Eurasia (the combined continental landmass of Europe and Asia).
• Some sources estimate that Russia contains over 30 percent of the world's natural resources. 

Modest Skyline Downtown Moscow

If a picture tells a thousand words then people need only compare a picture of downtown Moscow's modest skyline with a picture of Beijing China which is rather overpowering. Clearly, the overwhelming mass, density, and number of sophisticated buildings in Beijing dwarf those in Russia's capital. Simply put, Russia is not the massive global power American media portrays it to be. Elevating countries like Iraq, Russia, Iran, and North Korea to "major threat" status has allowed money to pour into what President Eisenhower years ago aptly named the Military Industrial complex and lined the pockets of Washington politicians and their cronies for decades.

The fact is with all the bravado aside a person might call the military situation in Russia as a bit dire. For example, Moscow has ordered 132 T-14 Armata main battle tanks and T-15 heavy infantry fighting vehicles, with the first nine to be delivered this year but the fact is this is only a drop in the bucket considering how many they need. An article recently published details how Russia has ordered the production of a new generation of tank but because it lacks the money for a huge number it will continue to rely on older equipment much of it dating back to the cold war. In 2015 the United States and NATO received a rude shock: The Russian Army unveiled a new main battle tank, known as T-14 Armata. The new tank together with a new heavy infantry fighting vehicle using the same chassis is slated to replace older T-72 tanks and its 1980s-vintage BMP-2s, infantry fighting vehicles. It seems, for now, Moscow will probably buy small numbers of T-14s and T-15s just to keep the production line open while waiting for the economy to improve.

Russia Spends Little On Weapons (Click To Expand)

Now that we have established Russia is not an economic powerhouse it is time to examine the real "bug-a-boo" and that is its military might. Those of us that have had the awesome experience of going deep deep down under a Russia city to ride the subway will testify that it is indeed worthy of being declared as a shelter during a nuclear attack. The fact is much of our apprehension of Russia stems from its massive nuclear arsenal dating back to the cold-war. Today nine countries have a total of over 15,000 nuclear weapons the U.S. and Russia together have over 14,700 of them. Like many people, I do not find what is known as the concept of Mutual Assured Destruction, or MAD to be reassuring. Still, the truth is the nuclear deterrent we hold is a hundred times larger than needed to stop anyone sane or rational from attacking America, and for anyone else, an arsenal of any size will be insufficient. Logic dictates Russia would be insane to launch an attack on America and would have little to gain considering its military spending and the weapons Russia stands ready to deploy, America has little to fear and most of the noise is from those wanting more money to enrich those producing weapons. 

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Footnote; The first part of this series appeared a while back and this follow-up piece was lost in the shuffle of more important matters. The link to the first part is located below and under that is a link to "Russia Today" its propaganda news channel which you may find interesting..
http://brucewilds.blogspot.com/2018/06/putin-bully-and-thug-or-great-statesman.html
https://www.rt.com/

Housing In America - Part II

Housing Prices Should Not Become A Game

When it comes to real estate, low-interest rates at some point becomes a double edge sword, that affects both its value by making it easier to purchase thus driving up prices, and at the same time allowing more building to take place and increasing the supply. Often we reach or exceed demand, this eventually has a dampening effect on rents and people stop buying it as an "investment". Rents from real estate and the prices it brings when sold must appreciate more than the natural depreciation from the wear and tear from age or the main driver for owning it as an investment quickly vanishes. Oversupply is the bane of real estate and crushes the value of this hard and expensive to maintain commodity. History has generally shown homes that are paid for and unleveraged to be a better than average place to store wealth when purchased for a good price, as to whether now is a good time to buy that is difficult to say.

How does the reality of a half-empty apartment complex and a slew of empty houses gel with what we hear about soaring rents, the demand for more housing, and more affordable housing? Those declaring housing has fully recovered must admit housing prices vary greatly across the nation and this is a problem that can be difficult to get your head around. Only politicians in Washington would be silly enough to think that landlords who have to compete against subsidized housing would be eager to remain in the game or that someone working for a living enjoys paying more for an older apartment than someone on the dole who moves into a brand new unit for a fraction of the cost. By not rewarding those who do the right thing our current policies have a corrosive effect on both housing and society.

America has built a lot of housing units over the years, now we must face the fact that they need to be maintained. Instead of focusing and creating policies to rebuild our cities by encouraging homeowners to invest more in upgrading windows, adding insulation and improving the existing housing stock, Washington has doled out low-interest money to Wall Street and home builders in an effort to kick-start the economy by building new housing to generate the illusion of growth and rising prices. Currently, we are in uncharted waters and where this market is headed is anyone's guess but one thing is certain it is not straight up. Speculating on housing is dangerous and should not be encouraged through bad policy. When people leave older neighborhoods and move to a new house in the suburbs enticed by current artificially low-interest rates they in effect hollow out our cities.

Old Houses Need To Be Maintained

Adding to our housing problems is low down payments and other policies often put people in older houses that they have no interest or knowledge in how to maintain. This can cause even more people to flee the area and brings about further decay. When offered the choice many people find moving easier than repairing and maintaining their homes or neighborhoods and low-interest rates power this trend forward.  Policies should be geared toward creating jobs that maintain these units instead of making them prematurely obsolete. This is a flashing red light warning of danger ahead. By choosing the easy answers America has not faced its housing problems with long-term solutions and encouraging this bodes poorly for the future.

Get your financing in order and get the project started before the market dries up has been how developers everywhere have operated for decades. I have owned an apartment complex in the Midwest for many years and many houses in my area are empty or under leased. In 2005 and 2006 prior to the housing collapse, many people were looking at second homes, today not only have they shed the extra home many have doubled up with family or friends reducing the need for housing. This has left me busy trying to sort out and make sense of the current economy. This is no easy task, it seems we are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. Currently, we have a shortage of "qualified" buyers and renters.

A close look of permits and starts shows many of the future housing starts are multi-family units, these are being built with cheap "Wall Street" money for the markets of tomorrow with little regard for the realities of today. A new report by Yardi Systems Inc indicates apartment construction is far outpacing demand in many markets, this overbuilding of multi-family will have ramifications on the cost of living and the resale value of homes going forward. It is a fact that single-family housing starts have languished as the percentage of multi-unit buildings under construction has risen. Some of these may be slated as condos but another name for an unsold condo that is being leased is "apartment."  Let us call a spade a spade, much of what we see today is not a housing market, it is a place where too much money has gone to hide under the impression and hope it will pay off when inflation awakes and comes out roaring from its quiet slumber.

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Footnote; The links below are to articles that delve deeper into housing and what we are building when it comes to housing. The first link is to the first part of this two-part series'
 http://brucewilds.blogspot.com/2018/09/the-housing-picture-is-not-brightening.html

 http://brucewilds.blogspot.com/2017/10/city-boast-of-constructing-another.html
 http://brucewilds.blogspot.com/2018/02/housing-policy-feeds-and-hides-growing.html
 http://brucewilds.blogspot.com/2015/11/cookie-cutter-urban-sprawl.html

The Housing Picture Is Not Brightening - Part I

A House Should Be Earned - It Is Not A Right

The future of the housing market is a topic that has been subject to a great deal of debate and can be somewhat confusing. The intention of this post is to dispel some of the myths that have been generated and add some clarity to the discussion. One of the charts below clearly shows that new construction is still far below levels prior to 2008. It should also be noted that much of the new construction is in apartments and not single family dwellings. In much of the country, housing units are being built using cheap money flowing from the Fed and Wall Street under the idea that if it is built "they will come." While many people claim the formation of new households and pent-up demand drives this construction I beg to differ. I contend it is a combination of too much money looking for a place to hide and buyers looking for a safe place to put their money.

Consumers Adding Debt - Not Buying Homes

As I wrote this post I tried to do a bit of additional research to supplement what I know as a contractor and Apartment owner but what I found was more like a pack of lies and half-truths spun to fit an agenda. In America, the government, coupled with a slew of builder and Realtor associations control the housing narrative. Huge discrepancies exist in the cost of housing in the various markets across America and while price variations are not uncommon they should be seen as a red flag and reason for caution. Many of the messages being promoted as common knowledge do not pass serious scrutiny. Those of us in the trenches and with our boots on the ground often see things from a different perspective than the economist in their ivory towers, Washington politicians, Wall Street elite, or the media. Homeownership in America is in decline and demographics are not supportive of higher prices. If prices rise it most likely it will be a result of inflation.

Housing Has Not Recovered To 2008 Levels

Note the amount of traffic, or calls an apartment complex receives may have little to do with the strength of the market. A well qualified potential tenant only has to apply at one complex while those who are rejected continue time after time. Government subsidized housing through programs such as section 8 have cannibalized the market often taking the "best of the worse" and leaving those landlords who choose not to participate with a rather unsavory pool of potential tenants from which to choose. This often includes those denied government housing, nearly bankrupt, or chronically unemployed. The city where I live ranks 23rd in the nation for having the most "zombie foreclosures" however, markets in other parts of the nation are often not as strong as the media claims. A relative of mine who sold a home with an extra lot that was on a golf course north of Houston several years ago took a severe beating. Weak pricing in a market that was touted as very solid is more proof that what many claim is a "boom" is far from spectacular.

A Bloomberg article years ago titled "Wall Street Unlocks Profits From Distress With Rental Revolution" looked behind the curtain and pointed out that a great deal of this housing recovery that has driven the average home price up 30% since 2012 has been the result of Wall Street hedge funds buying in bulk foreclosed houses in order to turn them into rentals. Like many people, I find it totally objectionable these deals were "bundled" and offered in such a way that allowed big business to crowd the average American out of the housing market. In parts of the country, cash fleeing China and other troubled countries has flowed into the market pumping up prices. These type of situations create a questionable base for higher home prices when we consider the low end of the market is driven by Fannie, Freddie, and the FHA all insuring 3.5% down payments from borrowers that lack substantial collateral. History has shown that such special financing simply encourages people to rush out and buy homes they cannot afford. It is important to remember that low-interest rates do not necessarily bring about quality growth or prosperity, decades of slow growth in Japan has proven this.

One of the sad accomplishments of current Fed policy is that low-interest rates often do not create all that much new demand but simply moves what does exist forward. To make the situation worse the FHA is busy issuing and guaranteeing risky mortgages written by thinly capitalized non-banks. In 2012 the large Wall Street banks represented over 65% of FHA backed loans, today that number has cratered. Even they have realized loaning money to people that won't pay it back is a recipe for disaster. America is preparing for a replay of the 2008 housing crisis. Our politically motivated government has insured subprime mortgages with down payments of as little as 3.5% while using weak underwriting standards. We are even seeing restrictions raised on borrowers with past foreclosures in a housing market that may drop 20% when this Fed Wall Street bubble pops. Years ago Lee Iacocca who brought Chrysler back from the brink and made the company viable said something to the effect of when you special out all your cars on Monday you have no sales for the rest of the week. In the current situation, low-interest rates are only one of the factors distorting and skewing America's housing markets, others will be discussed in part two that will be published tomorrow.

 (Click Here To View Part II)