Thursday, December 5, 2013

Musings and Random Thoughts

A few things have washed over the transom during the past few weeks that need to be addressed. While not earth shaking on their own they may prove in time to be significant and profound.

High Speed Rail:
Readers of this blog fully understand my thoughts regarding the high speed rail in California (and most places elsewhere as well). I have traveled thousands of miles on this transit system in Europe; I know what it can do. I also know that it has contributed to the financial problems that beset the European Union. Debt is not a wondrous thing as France, Spain and Italy now know.

Superior Court Judge Michael Kenny judge in California says that the High-Speed Rail Authority cannot spend the Proposition 1A funds until the funding plan is brought into compliance with statutory requirements. Many believe that this cannot happen without spending more money than is available – a viscous circle. But then again most government spending works this way. Spend, spend until you can't turn away. I'm reminded of the story that tells of Teddy Roosevelt demanding more money for his navy and being refused by congress. He sent the fleet to the Philippines with enough funding for a one-way trip, then said if you want the fleet back – fund my navy. You wonder if the same thing is happening here, let's build something that essentially is worthless on its own (29 miles of track in the middle on California that connects nothing to nothing) but then demands to be finished. For a good overview check this out (one minor typo re: billions and millions).  CLICK HERE

I am beginning to hope that the adults are returning to the argument and like the boy along the emperor's parade route who pointed out the deficiencies of the emperor's clothing allowance, we can only hope that the courts continue to lead in this open debate. It is now very obvious that the state senate and assembly  (who are following the emperor's footsteps) should check out their own toga allowance as well.

Why is it that the feds continue to think that they need to meddle in housing? Since the post war years of the FHA and other later "Great Society" programs that have morphed into our current miasma of affordable housing, HOPE funds, non-profit do-gooders, Fannie and Freddie, and other anti-market housing groups, housing has been a cyclical disaster.

No other economic component of modern western society is as critical to the personal wealth of a citizen as the ownership of their home. This is true here in the USA as well as almost every other modern society that places value on the house as an asset and a security for the future of the owner. Sadly it is also seen as a safety valve by the owners for government inflation, as prices rise and money is devalued, the home acts as a buffer; that is until it isn't.

This we all have witnessed during the past fives years as a result of the shenanigans of the banks (and becoming more evident every day), the government and its housing policies of free homes for everyone (now even Barney Frank is contrite), and private speculation by builders and citizens alike. There was no hand on the throttle (even if there should have been in an open market). When the system is gamed for political purposes we all lose and this loss has been catastrophic for many.

And it seems that the timing is right to fiddle with the housing controls again. This article in today's WSJ 
has set my antennae tingling. Housing is seen as a playground by the politicians and unfortunately memories are short. If supply is restricted due to high costs of either construction or borrowing only the politically connected non-profits will be building. Eventually (and not too far away) all housing will be built by a non-profit agency sanctioned by the state and the feds that will control who lives there and the debt for the home will be held by federal institutions. Hold on tight, as I have said in previous blogs we are heading for increased housing prices, lack of availability, increased rates, and new federal regulations to fix the problem. Your new landlord will be a government agency.

Stay tuned . . . . . . . . .

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