death in the southland
according to u.s. statistical data americans are saving less and borrowing more at a rate unseen in the country's short history.
in short, folks are spending more than they make. as the depression era generation dies out and with it, the idea that you should put money away for a rainy day, the new default behavior is to accumulate as much bling as possible at all cost. i must have new nissan 350z. i must own a huge flat screen tv. i must buy more super expensive t-shirts. i must own that $1,500 fendi handbag.
so, in order to have more bling than is available with one's current cash flow, one must sell your future by borrowing from a credit card company. as long as you pay the minimum balance, you can have unlimited access to bling for as long as you reach your final credit limit.
now, what happens when this limit is reached? for most homeowners there is an option that keeps the cash flowing into their lives limited only by the value of their homes. borrowers can give a portion of the equity in their property to a willing lender, who in return gives the borrower an amount of money that is equal to the equity taken. homeowners do this because they believe that the value of their homes will always increase. with a system where the property always increases in value, the homeowner always has more potential cash-flow by using this system. according to the economist, this method is being used at an increasing rate.
this is all fine and dandy, but what happens when a person or family need to see their house, after having borrowed all the equity away? they no longer have the money to purchase a new home and are back to square one.
what happens if the value of a property decreases or stagnates?
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the southwestern portion of the united states is the nation's fastest growing region. homes are being manufactured, sold and bought at a rapid pace - homes, that will be used as tools, both by borrowers to increase cash-flow and lenders to simultaneously increase indebtedness and increase equity in properties whose value will supposedly never decrease. this is capitalism in full glory.
southern california, in it's natural state is harsh and a bit inhospitable to human habitation on a large scale, suitable to the creatures and critters that have lived there for millions of years. with california's crowning achievement - the los angeles viaduct had southern california become habitable for humans on a large scale. the annual rainfall that falls from the skies in this permanently parched region could never sustain the tens of millions of humans living there.
i lived in the high desert of southern california until 1986. summer was always a bit scary as it was fire season. it would be 110-120 degrees, with no rain in sight for 3 months in a row. immediately after i left, there was a major forest fire that nearly consumed the town that i lived in and charred tens of thousands of acres. at the time, fire season was limited to summer and part of the fall. there would be a few rain showers somewhere around christmas and all would be green for a few months, only to wither into kindling for the next fire.
california is an incredibly large and complex state. it possesses what is called "sansan", the second largest mass of population in the united states. as you may have guessed, it stands for san diego - san francisco. and represents an uninterrupted stretch of industrialized territory between the 2 population centers. industrialization that includes suburbs, industrial parks, factories and farms. the largest such area in the u.s., by population is "boswash" - boston to washington.
during the several droughts that existed in california in the 1980s there were battles played out in sacramento between the farmers of the central valley and big shots from the cities of southern california. there was only so much water to go around and who was going to get it? farmers, who needed to grow crops for the humans in southern california to consume, or southern californians, who needed to water their lawns and fill their pools?
southern california, like las vegas and places in arizona is essentially artificial in nature. looking at all the cities of the world, before the 20th century and you will see that they are all set next to water sources. now, cities are built in and water is re-routed to them from somewhere else - somewhere that may actually need the water for itself. it is a luxury to live in a place that normally would be incapable of supporting human life on this scale. look at any picture of san diego county in the 19th century. there isn't a tree in any one of them. the region is nothing more than a desert. there's nothing but coyotes and brush. having a green lawn, pine tree in the back yard and swimming pool in a region that averages 90 degrees in the summer is a luxury. in fact, living in any capacity in this kind of environment relatively comfortably is a luxury.
so now what we see happening is more drought in the region. fire season is now year round, with last spring producing 2 major fires in the los angeles area, including one on catalina island. today, the imperial valley has declared a water shortage. and there is talk, by the harbingers of global warming that the region will be in a permanent drought in the coming years.
so, what is going to this region when there isn't enough water to properly hydrate the region's residents and severe water rationing is year round? what is going to happen when major fires like san diego's normal heights fire destroy suburbs year round? what going to happen when people are permanently barred from watering their lawns or forbidden to fill their pools, punishable by penalty of jail time?
as i said before, living in this region is a luxury. speculators will not want to buy property with a swimming pool full of dirt, a dead lawn, and dead tree in the backyard. it is less desirable - less luxurious, and therefore, less attractive to other speculators. without speculation driving prices up, the prices of available properties will either stagnate or decrease. speculation is what increases the value of objects in a capitalist society. those who gave away all their equity to lenders, will find themselves in big trouble. they will have to sell their properties for reduced prices, which means that not only will they have no money to buy a new home, but they could end up actually owing the companies who gave them money in the first place. that's a double whammy.
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