The most recent, and certainly the most evident consequences of negative feedback can be seen in housing. Once, the nation’s darling for quick wealth building and high paying employment; housing has now turned to a negative feedback condition. 

Let’s take a quick look at how this negative feedback manifests itself. Housing was never sustainable as an ongoing enterprise, as it represents the sector referred to as “durable goods.” Durable means just what it says, as in, lasting for a very long time. Once you buy a home, you don’t need another one next year…or for the next 50 years for that matter.

Therefore, for housing to be sustainable as a base industry (which it isn’t), we would need a never ending supply of “qualified”   new home buyers. Note the emphasis on qualified, meaning that the buyer can actually pay the loan back.

So where do you get a never ending supply of new home buyers? Now you understand both legal and illegal immigration in one short lesson.

Our leadership says that housing brought down our economy. But you don’t believe that one little bit do you? Of course you don’t, because it isn’t true. Our government encouraged the housing bubble to get out of the last recession after the tech bubble burst knowing full well that it too would end badly. (We’re here for a good time, not a long time).

But wait, Bad Ben Bernanke said the housing wasn’t a large enough sector to bring down the overall economy! Yet, our leadership chants, “We must stabilize housing before our economy can return to normal.” These guys need to talk more often and get their stories straight.

But even if we had a never ending supply of new buyers streaming across our borders, housing costs a lot of real money to build. Where do you suspicion that these new buyers get their money to purchase homes? If you said, “From their jobs created by the housing bubble,” you would be more correct than you might care to imagine.

During the positive feedback loop in housing, home building was supporting home building. (Oh, this can’t be good). The carpenters, the electricians, the concrete mason, the plumbers, the excavators, the real estate and mortgage brokers, the banks, the government planners and tax collectors, the insurance companies, the paving companies, the material suppliers and thousands more were in the positive feedback loop which on the surface appeared like a virtual never ending bonanza. (Never-ending is not an element of a pyramid scheme).

So then, what happens to all of the aforementioned jobs when qualified buyers fall short of the required demand and home construction slows? What if construction stops all together; which we always knew that it would? The obvious answer is that the positive feedback loop that employed millions upon millions has now turned negative, and the original process plainly reverses. (And just when I thought I was witnessing perpetual motion in action).

The electrician can no longer afford his house payment because the plumber isn’t building a new home that the electrician can wire. The plumber can’t make his or her house payment because the electrician isn’t buying a new home that the plumber can plumb. (Don’t attempt to adjust the picture on your screen; it’s starting to clear up).

The only way out of this mess then, is to revive the new home buyer market, or otherwise, all of these folks who are presently without work are doomed to losing their own homes. Hmmm…what do you know about that? As Alan Greenspan famously said, “I just didn’t see it coming.”

I have news for Alan; a blindfolded man on a fast horse could have seen it coming.

To borrow a line from one of our King of Simple pals, “Well darn it anyway Cletus, another beautiful theory murdered by a brutal gang of facts.”

Those physical limits will ruin a good Ponzi scheme in a New York minute. There is always that spoiler of the impossibly of exponential growth. There are unfair limits to viable employment.  There is a ridiculous mathematical impasse to even the great American pyramid scheme.

Homes today are continually going down in value, as is commercial real estate. How can that be? Homes and commercial buildings really do cost a lot of money to build; they also represent a tangible asset. However, tangible assets are purchased and maintained by physical employment that is sustainable; and therein lies the problem.

Have you ever considered how it possible for China to have unprecedented growth while the U.S. has unprecedented contraction? That’s because our leadership gave them our sustainable economy and we kept the phantom “service economy.”

So here we are, all dressed up and no place to go. When will the housing boom return? I’m thinkin’ in the same year that Brett Favre wins the Super Bowl.