Economics has become a bit of a farce lately. Why? For the last 200 years the root cause of economic downturns has been the same: land speculation. Consider American history:
1. Panic of 1818 - preceded by a huge land bubble (which popped due to exoberant debt and an increase in land taxes)
2. Panic of 1837 - preceded by a huge land bubble, speculative frenzy in canals (which popped due to the Specie Circular)
3. Panic of 1854 - speculative frenzy in lands near railways and canals (popped due to exoberant debt)
4. Panic of 1873 - speculation in commercial property (popped due to exoberant debt)
4. Panic of 1893 - another land boom in silver lands
5. Panic of 1907 - overbuilding due to land speculation
6. Great Depression - huge levels of mortgage debt in city areas, farm banks collapsed due to excessive land speculation in farm lands - in Chicago a huge land boom occured, so big, in fact, that after 1928 not one property was built there 1948!
7. 1954 and 1960 - tightened monetary policy (albeit, it did hurt the housing market, which simply implies housing is a transmission mechanism for consumption and investment).
8. 1970 - land boom
9.1975 and 1983 - huge residential property boom, millions of acres of farm land were displaced for the purposes of residential housing (hence, why inflation in agricutral lands was occuring *even before* any oil shock) - companies had invested millions in land, and when interest rates were hiked, these turned into malinvestments
10. 1990- commercial property boom
11. 2001 - housing did contract, although its probably a false negative
12. 2008 - just another part of the story - excessive investment in land which fuelled consumption and investment. In this case a massive boom in real estate everywhere, but China, UK, US and emerging europe in particular.
This bust will be mighty. In 1929 it was the US bubble causing contagion. This is universal.
No comments:
Post a Comment