Good Morning Middle America, your King of Simple News is on the air.

U.S. NEWS: Economists believe that we may be in recession. I believe that the sun may have come up in the East this morning. Economists also believe that unemployment may lead to a downturn in consumer spending. I believe that it is cold in Fairbanks, Alaska in January.

Most economists, along with “Bronco” Ben Bernanke, Alan “Cash” Greenspan, and George “Badlands” Bush also believed that “housing was not a large enough sector to affect our entire economy.” I believed that is was.

Now these same economists believe that our economy won’t recover until housing recovers. I believe these people are morons.

But, this news does lead me to a dire prediction; housing as we know it will never recover. I know, never is a long time. But hear me out and feel free to debate my points.

“Housing as we know it,” should be considered to mean, large, expensive, non-functional, inefficient, overpriced and having nothing whatsoever to do with basic shelter. The former description is what housing has become, has it not?

Totally non-functional roof lines, non-functional grand entries, 1000 square foot per occupant, energy eating black holes of granite countertops, imported tile floors and debt up to our eyeballs pretty much sums up “housing as we know it.” Sounds like utopia to me.

The fact that most home loans are based on two incomes doubles the jeopardy of making the dreaded house payment. If one of the happily and hopelessly indebted couple loses his or her job, well, there goes the happy home. Throw in an SUV payment or two and we have the former marital bliss hovering on the brink of civility.

As the recession deepens and job losses continue to occur, foreclosures will also continue to rise, not in sub-prime loans, but in the main sector of our recently unemployed citizenry who have become victims of both poor debt practices and our ill thought and badly broken economy.

This will further weaken the housing market as inventories of unsold homes rise rather than return to normal levels. In the mean time, lenders will continue to tighten qualifying standards, requiring down payments and proof of income, which they should, but this will also further exacerbate the problem.

As time goes by, our ever present enemy of purposely induced monetary inflation along with rising energy costs will drive the cost of essential goods and services skyward, leaving fewer and fewer discretionary dollars in the hands of the average consumer.

At the same time, the increasing competition of low cost foreign labor, combined with a glut of domestic labor created by increasing unemployment and the annual addition of more than 1 million legal job seeking immigrants will cause real income to fall drastically in comparison to future building costs.

Yet another negative factor that is often overlooked will be rising taxes. As our economic nose dive will continue to cause tax collection to wane, government will unwisely attempt to increase taxes, further reducing consumer purchasing power.

By the point that the existing unsold housing in the U.S. is absorbed (some years), the spread between declining average income and the rising costs of new development and construction will have become sufficient to halt the entry of the average person into home ownership; forever. Much as it already exists in the remainder of the world.

Globalization will have at this point accomplished what it was intended to do; share poverty equally.

Interestingly enough, at the lowest point in the housing debacle there will be bargains to be had that will be based on negative market forces, rather than replacement costs.

This is not necessarily going to be a windfall from a resale or profit standpoint, but simply from an affordability standpoint. One that may never avail itself again, as once the existing homes are purchased at enormous losses to owners and lenders, replacing that home with the future new construction costs, will prove impossible. This will be a very timely period; one shot is all you get.

We have in fact reached the end of an era and housing as we know it will be gone like the buffalo.

Exponential growth (or geometric growth) is growth by a fixed rate, such as 5% per year. This is opposed to linear growth which is growth by a fixed number. For example, if a family consumes a loaf of bread every week, they would consume 52 loaves of bread per year, year in and year out. While over time, the consumption of the family would grow linearly, or on a cumulative basis, their annual consumption would remain constant.

The first year our family would consume 52 loaves, the second year 52 loaves, for a cumulative total of 104 loaves and then 156 in the third year and so on. This is much different than the U.S. economic system of exponential growth, which grows geometrically or in proportion to it current size.

Should we have applied exponential growth to our loaves of bread and factored a growth rate of just 4% per year, after 17.5 years the family would be using 2 loaves of bread per day. In another 17.5 years, 4 loaves of bread per day and so on to a point that over a given period of time there would not be enough bread in the world to fill the demand.

After reading the above example, how many of you thought, “Seventeen and half years is a long time to double?” It is my belief that the total and complete disconnect from time is the culprit that allows us to base our economy on an impossible mathematical foundation; that of exponential growth. Any exponential growth calculation, when applied to a tangible resource in a finite environment, is a model only valid for a temporary period of time.

The other possibility for our mystifying acceptance of the impossibility of exponential growth (other than misunderstanding the element of time), would be that we view the time that the growth scheme will work as being sufficient to last through our personal life span.

Could it be that as a whole, we simply don’t care what happens to those who will come after us? And that we justify our greed and inaction under the thin veil of “they” will find a way? I’ll leave that for you to decide.

Our system of economics in the U.S. is in fact based on exponential growth. Every politician from small town mayor to the president of the United States promises growth. Not linear growth, but exponential growth.

When our government bean counters say that the economy is growing by 4% annually, they are referring to 4% of the current economy. Or, that our overall economy is now 104% of what is was last year. This promised growth will continue only until such time that it reaches an impenetrable barrier such as 100% depletion of a given critical resource, for instance…oil. Or, the inability of resources such as farm land to produce sufficient food for the exponentially growing population of the world.

We won’t slowly run out of resources; we will suddenly run out of resources. Technology has allowed us to harvest and consume resources in an exponential manner to keep pace with our exponential growth. Technology may well continue to advance, however, the resources that technology is applied to will continue to decline. You can write that on the wall.

As an example, modern underground coal miners by using the “advancing long wall system” can mine more coal in one shift, than the same number of old time miners could mine in one year! We are apparently in a hurry to reach the end. Once more, pack light, it’s gonna be a short trip.

Our system of “compounding debt capitalism” by its very design, insures both constant inflation of the money supply, constant population growth and exponential consumption of finite resources; all of which are mathematically and physically impossible in a finite world. And that is a very bad thing for those whose future is based on “The Biggest Lie Ever Believed,” the lie that “exponential growth is good.”

If you find that you’re on the wrong train, get off at the next stop. It makes getting back home a much shorter trip. ─ Mike Folkerth

Good Morning Middle America, your King of Simple News is one the air.

I want to report some actual personal experiences to shed some light on the subject of bringing pressure to bear on our politicians. For six years I sat on the board of the local power company and for five of those years I also sat on the board of the power generation and transmission company.

I was elected to those boards during a period of unrest among the customers, better known as “rate payers.” It seems that the rate payers didn’t like the rates that they were paying and similarly didn’t like the way the current directors and management were running the company. Eventually, as their terms came up for vote, all of the directors were voted off save one and the manager resigned under pressure.

I remember those first couple years of board meetings when the rate payers would pack the board room and demand change. It was unpleasant to attend the meetings when your bosses were observing every move to be certain that their newly elected directors were doing what they had promised to do. The rate payers by virtue of belonging to a cooperative power company were after all, the owners.

I can tell you from that experience that bringing pressure to bear and then closely observing the actions of the newly seated directors did in fact create sweeping change in our power company.

At the county level, a very unpopular piece of legislation was on the verge of passing due to pressure on the commissioners from a vocal minority of our local citizenry. On a cold snowy winter night some 300 angry voters got out and attended the public debate for that legislation, the commissioners decided against passage. Those commissioners needed to see and hear support from the opposition.

The same level of commitment that got all of my neighbors out on that wintry night to defend their rights and make their opinions known, also applies to our federal officials.

While we can’t sit in on their meetings in Washington, we can in fact bombard them with e-mail, letters and calls to their local offices. We can’t appeal to the good in most politicians as there is little good to appeal to. However, more than anything else in the world, our politicians want to remain politicians. Being voted out of office is their worst nightmare. And the power that we do have, is bringing their worst nightmare to fruition.

I strongly believe in term limits and one way to accomplish that is to vote incumbents out. Become very active in not only bombarding your current representatives with your feelings about them, but also encouraging others to do the same. If we are not part of the solution, then we are part of the problem.

I can tell you from experience that sitting under the watchful eye of those who hold the key to your continued service, works wonders for the outcome.

America will never see the return of the Middle Class of yesteryear and that is a natural fact. However, if there is to be any remaining quality of life whatsoever, we must pressure our leadership to understand that exponential growth is the problem, not the answer.

Good Morning Middle America, rise and shine, we have a big job to do today; we have to save the U.S.A. from ourselves.

I promised to talk about the future of housing this morning and we will. But first, there is one bit of news that I need to report that hits close to my home here in beautiful Western Colorado.

All of you regular readers may remember that I talked about the well known Paonia Colorado sandal maker, Chaco, pulling up stakes and moving their manufacturing to China. The workers are calling today “Black Thursday” as the last American made pair of Chaco sandals will roll off the line and be shipped at 10:59 AM.

As we watch America being disassembled bit by bit, as we watch our fellow Americans lose their jobs one by one, we can no longer stand by and allow our political leaders to purposely pass legislation that chips away at our very foundation. It’s time to fight or we will find ourselves in the position of Joseph, Chief of the Nez Perce, when he said, “I will fight no more forever.” For it was the same United States Government who destroyed the Nez Perce when they wanted what the Nez Perce had…their land.

But, housing it is for the remainder of this article. Housing is not nearly at the bottom of the slippery slope that it has been descending for some two years now. It’s a very long slope.

As jobs continue to be lost and as prices continue to rise for necessities, mounting foreclosures of ill thought home purchases will continue to push the market downward. The interesting thing about this situation is that the very inflation that is pushing necessities up is also pushing the cost of building up.

Yet, market forces such as bankruptcy, foreclosure, unemployment and Chaco moving to China, trump the fact that the cost of building homes next year, will be more costly than the homes that are currently available.

Home purchases won’t come back to any positive degree until decent jobs come back and I’m not at all sure that is going to happen. I am certain that jobs won’t come back any time soon and certainly not in the next couple of years. In the mean time, inflation will continue the magic for which it is intended and that is giving our accumulated debt and our GDP the illusive appearance of being somewhat in balance.

Another thing that won’t happen this time around is a rise in average wages. The glut of labor that is being created by our ever increasing unemployment will artificially hold down wages even as living costs rise. Combine that fact with the pressure from low cost foreign competition in nearly every sector of American employment, and it does not bode well for the return of the housing industry.

It is important to understand that from a pure mathematical standpoint, wages must rise during inflationary times to maintain the current standard of living. For the reasons stated above, I don’t believe that it is possible to raise wages in this environment which brings us to the conclusion that our standard of living will continue to diminish.

If Barrack Obama or John McCain or most of our 535 members of Congress understand the subject that I have just laid out, they are keeping it a very closely guarded secret.

Use the links that Billy B posted yesterday to contact your favorite politician(s) and bring pressure to bear for an immediate and radical change of course before we too have to say, “I will fight no more forever, I will bow to the power of government.”

Good Morning Middle America, your King of Simple News is on the air.

U.S. NEWS: I can see that our government needs my services at this difficult time and place. They need for me to explain a few economic details that are bewildering to our leadership. Of course, third grade math is bewildering to our leadership, so such things as a 14% drop in mortgage applications is pure wizardry in comparison.

This calls for an in-depth study of the dwindling mortgage application situation, a study applying the advanced method of Mikeronomics.

To begin with, the latest month of foreclosure proceedings was 115% higher than the same month a year earlier. Throw in the steepest continual decline in home values seen in recent history and what you have are suicidal real estate people.

Asking someone to purchase a home in this market would be like watching a bungee jumper hit the ground and asking if anyone else wanted to try it.

However, there are far more serious issues to the housing market than those just discussed. After years of allowing anyone who could pass the fog-on-the-mirror-breath-test to qualify for a no-down low-down deal, we have about weeded out all of the buyers who shouldn’t have been given a loan to begin with, which seems to have accounted for the majority of the housing sales.

Going from zero down without the bothersome proof of the income necessary to pay the loan back, to having to provide a down payment and actually having a job, seems to have slowed down the process even more. Go figure.

Add to this the fact that some 3 million folks are putting their homes back on the market due to foreclosure and you would think that would be pretty much be the icing on the cake…wouldn’t you?

Well, not quite. There is the issue of job losses. For the past 6 consecutive months, the U.S. rather than reporting job gains in the hundreds of thousands, has instead reported job losses in the hundreds of thousands.

Under the new ridiculously strict lending rules, unemployed people can no longer qualify for a $300,000 home loan. To make matters worse, the unemployed people aren’t making payments on their present homes; a fact that is totally mystifying to Congress.

Congress people have difficulty understanding the correlation between unemployment and not having any money. After all, most of them haven’t worked in 20 years and get a check every month.

You can see that my Mikeronomics presentation of the housing debacle would be extremely difficult to comprehend for pre-schoolers and Congress people, but for Middle America… it’s crystal clear.

Tomorrow we’ll take a little trip into the future of housing.

Good Morning Middle America, your King of Simple News is on the air.

U.S. NEWS: Yesterday, July 28, 2008, the Whitehouse announced that our annual budget deficit would exceed $500 Billon and at the same time downgraded the economic outlook through 2009.

Our ceiling for the National Debt is now $10.6 Trillion and government will need it all to get through the next year. In my opinion, it won’t be enough.

When you run a business that began with a mathematically flawed business plan, the day comes that it is impossible to go on. So what does that have to do with the National Debt? Government is nothing more than a big business whose income is derived from fleecing the peons, formerly referred to as the Middle Class citizens.

Let’s look at government with a little Mikeronomics today. The sizeable National Debt of the United States is justified by comparing it to the GDP (Gross Domestic Product). Last count was that our debt was approximately 37% of GDP, which according to the residents at the state mental hospital, is an acceptable level.

Of course, there is the unfunded debt of such things as Medicaid, Medicare, Social Security and other promises, which adds another $59 Trillion and raises the debt level to 61% of our GDP. The vote was split on the acceptability of this figure, with the criminally insane unit approving.

General Motors had the same sort of plan as our federal government, so long as the income for auto sales was somewhat higher than the cost of doing business, no one was sweating the small stuff. Of course, no one was considering the present snafu when auto sales would dip somewhere below the cost of doing business, in fact, $8.6 Billion below the cost of doing business in 2006 alone and still counting.

The problem is that the debt doesn’t go down when business slows up, unless of course, you are a homeowner that is being bailed out by Congress in which the laws of consequences are being reversed; bad behavior is rewarded, good behavior is punished.

GDP measures all output of goods and services for a given year, including all government spending! Uh-oh. So tax collection to our government is the same as vehicle sales to GM and with unemployment continuing to climb, tax collection could be an issue for some years to come. Yet the National Debt continues to climb at a record rate.

Our government’s plan was for growth in GDP (and population) was to remain constant for at least long enough for those currently involved with unselfish service to their country to retire. The plan for growth of the magnitude necessary to service the debt was never mathematically possible.

America has operated on the false footings of ever expanding credit, inflation, and the expansion of phantom monetary capital for 35 years and we are about to pay the piper handsomely for all of the free music. Or should I say, that our children are about to pay the piper?

In my book, “The Biggest Lie Ever Believed,” I wrote that most baby boomers thought that they were going to get out with all of their trappings by passing the debt batons to their children. And I agreed that temporarily, that certainly appeared to be true.

“Appeared” was the key word in the above statement. If you are a boomer, suit up, you’re going in the game. There is only one possibility left for our government to artificially increase GDP and that is with inflation. For those in or near retirement, additional inflation is pure poison.

The only other option for government is to tell the truth. Tell our citizens that our system of exponential growth in a finite world is impossible. And that inflating our money supply and increasing credit and debt is only exacerbating the problem. But Ron Paul tried to tell us that and was branded a kook.

David Walker, the former Chief Comptroller General of the United States, and a personal hero for me, also tried to tell us the same thing and recently resigned his position in frustration.

The majority of Americans will follow the flawed party line politics that have brought us to this juncture to the bitter end. The good news is, we can pack light; it won’t be a long trip.

Good Morning Middle America, your King of Simple News is on the air.

As the self described “hardest working ever” and consequently the “lowest rated ever” Congress, has passed the Fannie (Federal National Mortgage Assn.) and Freddie (Federal Home Loan Mortgage Corp.) bailout, we need to take a closer look at just exactly what that little piece of hurried legislation has accomplished.

First, it is important to understand that Freddie and Fannie hold the mortgages for about half of all homes in America. Second, they are both private corporations that are traded on the New York Stock Exchange, not government entities; but none the less, are tools of our mathematically challenged government leadership.

Freddie and Fannie take loans off the banks hands in order to pass on the risk and to enable the banks to constantly make more loans and collect more fees without the bothersome issue of collection, which has become a problem of some magnitude.

So why would the public buy stocks in companies such as Freddie and Fannie who I have pointed out for some years to be extremely risky? The answer to that question was always evident; should there ever be a failure, the federal government would reach deep into the taxpayers’ pockets and bail out the stockholders. The proof is in the pudding.

Exactly how bad is our banking and economic system when the feds bailout private corporations to the tune of billions and begin to seize banks on a regular basis? I think that answer is self evident….it’s horrific.

To better understand just how horrific, in that piece of bailout legislation was another provision that raised the ceiling on the National Debt some $800 BILLION!

Let’s also put that last figure into perspective. For the first 204 years of this nation’s existence, until 1980, our total accumulated National Debt was approximately $850 Billion. Last week our Congress raised the ceiling by nearly the total accumulation of the first 204 years.

Make no mistake that Congress is well aware of the coming costs of bailing out our ill conceived failing economy and has simply authorized the funds ahead of time to do so.

As reader and commenter Billy B. has stated many times, “This is a Cinderella year.” Our government on both sides of the aisle is throwing everything including the kitchen sink at this economy to avoid total collapse. After all, we have a Democratic Congress and a Republican President and that makes for strange bedfellows, both being culpable and all.

As we observe our National and private sector debt rise to levels never before seen (in real numbers, but we don’t deal with real numbers we deal with government numbers) it becomes evident that our monetary managers believe that a little hair from the dog that bit us is exactly the remedy needed. Therefore, Doctor Bernanke has prescribed more credit as the answer to too much credit. There are people who have been institutionalized that aren’t that crazy.

On another front, our government has also had a change of heart on the legality of coercion and money laundering. The U.S. Treasury by virtue of our newly passed legislation will heavily suggest that banks discount their bad loans for nice clean money from the taxpayers’ pockets.

The seriousness of our current situation escapes most Americans who believe that things will get better after the election. However, if Billy B. is correct, instead of the Prince showing up, Cinderella will do the pumpkin routine.

Turn her into the wind, drop the mainsail, and batten down the hatches, it’s gonna be a big blow.

Good Morning America, your King of Simple News is on the air.

While no one ever accused old Mountain Mike here of being a left wing liberal, they also never accused me of being a right-wing-died-in-the wool conservative. I’m one of the troubled sorts that are mostly referred to as a G.D. Independent.

Hard core Independents mostly comprise of people who actually think rather than being directed. You know the drill, “Hey Charlotte, you wanna stick your tongue in the electrical panel and see if it’s hot?” If Charlotte were not a hard line follower her response would be, “Say what, do you think I’m nuts?”

If Charlotte were a hard line follower, her response would be “HOLY MOTHER OF JESUS, I THINK IT’S 240 VOLTS!

I have great hope that fewer and fewer people are blind followers and instead ask, “Where are we going so fast and why are we in this hand basket?”

There is evidence that the numbers of Independents are growing. If not, the two major parties are wasting a whole lot time and money pandering to a non-existent entity; emphasis on “pandering.”

My writing appears on many sites, some Liberal some Conservative and some so hard up they publish my stuff out of shear desperation. While I have always felt that I leaned toward the Conservative side, I’m never given up on the majority moving toward the middle.

But maybe, just maybe, there is a whole new category of Independents out there, not from the right, not from the left, but dug in and realizing that those folks who have been leading us…are lost! More people seem to be getting the message that all is not well under the current and proposed leadership.

In a flattering review of my book “The Biggest Lie Ever Believed” (and one that I didn’t even ask for), Victoria Stewart, Editor of Issues and Alibi’s magazine had this to say.

“I put off reading Folkerth’s “The Biggest Lie Ever Believed” because I just didn’t want to read another end-of-the-world-and-all-good-things diatribe. I have no patience with writers who demand the return of the American middle class, less than no patience with those who express a voyeuristic glee at anticipated suffering and experience a very un-Zen rage when I read yet another privileged professional exhorting the “workers” to change the system. I just didn’t want to read this book.”

“Imagine my surprise then, to discover that the book was not anything like the other books and articles I had forced myself to read. Not only was Folkerth witty and funny, he was smart and-most importantly-he was saying exactly what I believe to be true: The old days are gone. We have to change the way we live.” (Can you believe she was talking about me?).

Victoria went on to say, “There are many differences between Mike Folkerth and everyone else who is writing or pontificating about the economy. He doesn’t condescend. He isn’t an “expert” instructing the great unwashed. He understands the daily struggles of ordinary people because they have been his struggles. He recognizes that we might have some responsibility to our children and grandchildren. And he believes that we, that Americans, might actually be able to change, to fix this mess we are in. And he has some advice for doing it.”

I can’t thank Victoria Stewart enough for her kind words, but the most valuable thing that she gave me was a greater perspective of my own writing! “The old days are gone. We have to change our lives.” However, that change doesn’t have to be a bad thing. Live simple, live well, live long.

Good Morning Middle America, your King of Simple News is on the air.

Yesterday I made my future prediction for residential housing. In those predictions I stated that government would pull out all of the stops to save the non-sustainable housing industry.

I talked about Fannie Mae and Freddie Mac in my book. Today, as I suggested, they are broke. Our government however believes that these mortgage giants are too big to fail, yet failure was obvious to me from the outset. What will be the eventual cost for bailing out Fannie and Freddie? Some believe as much as $300 Billion, while others don’t think that is enough.

Yesterday President Bush dropped his objections to the bailout plan that was poised to aid the failing mortgage giants by allowing Freddie and Fannie access to $25 Billion of government loans. The vote passed the House and is expected to move quickly through the Senate.

The Congressional Budget Office says that the two big lending agencies may not need any of the money and worse case losses would be less than $100 Billion. I doubt it.

Please remember that Fannie Mae and Freddie Mac are publicly traded stocks that receive special government treatment…such treatment as not allowing them to go broke with the help of your tax dollar. I bet the Enron folks wish that they had gotten the same treatment.

The question that begs to be asked is where would our government ever get the money to bail out the beleaguered lenders? The answer is of course that they would borrow it from foreign nations and promise those nations that the U.S. taxpayers were good for it.

What didn’t make the main stream news was a little ditty at the end of the bailout legislation. News that is so staggering that it should have been headlined all across America. Remember my question as to where our government would get the money? This nifty piece of legislation also contains a provision to raise the National Debt ceiling by $800 BILLION, to a new record of $10.6 TRILLION!!

This is the hardest working Congress in history toiling away here. This is the Democrats who will save America by borrowing our way to success with the help of kindly nations such as Communist China, who is more than glad to give us another handout as they drive another nail in Middle America’s coffin.

The Republicans on the other side of the aisle are nothing short of horrible. When will we ever learn that neither of the main stream parties have the slightest interest in Middle America’s welfare? We simply allow the lost to take turns leading.

This is just in, please take time to watch it. I maintain that Ron Paul will someday be thought a genius.

http://www.campaignforliberty.com/blog/?p=232

Wake up Middle America, this isn’t a drill, it’s the real thing.

Good Morning Middle America. I promised more predictions, so here we go.

As I watch even the most optimistic economists finally get around to having to admit that the U.S. is in recession, I listen closely to their excuses for being “so wrong for so long.”

After all, being wrong about something as serious as our floundering economy can’t simply be explained away by saying, “Hey, I’m an idiot.” Oh no, it’s the oil price that threw them. How could anyone have ever predicted that oil would go sky high? Well sure, they could have read a book on the subject sometime during the past 50 years. Or they could have reasoned the using 87,000,000 barrels of a finite resource daily could come with some problems,…no they couldn’t.

Remember when Alan “Cash” Greenspan and “Bronco” Ben Bernanke both said that housing would make a soft landing? That reminds me of the elderly lady who was exiting the plane after a terribly hard landing. When she passed the Captain who was sheepishly saying goodbye to everyone, she said, “Did we land or were we shot down?”

Housing was shot down. And, for the distant future, it will stay down. Here’s the problem. The price of housing went up like a rocket. Why? America needed an economy and housing was it. A person who had worked at McDonalds for two weeks could get a house on the buy now and pay later plan.

What goes up must come down, and housing made a spectacular decent. Ya see, residential housing is an impossible basis for a sustainable industry. Housing represents shelter and nothing more. I wrote an entire chapter in my book on this subject and predicted the fall of housing more than a year before it occurred.

There is a huge difference between a house, a home, and an investment. If a person thinks that a house represents a true investment, they should stay home and watch the money roll in. Some of those ditzy economists who insisted that due to rising home equities, Americans weren’t really experiencing negative savings over the past few years, have foreclosure signs in their yards also. In this case, it wasn’t oil at fault, it was the bank. Sure it was.

Some types of housing will never recover as reality creeps into even an economist’s life. Large, energy sucking, tax draining, maintenance monster homes will die a slow death along with their foolish owners or their foolish lenders in states that have non-recourse laws. Non recourse means that the lender can only go after the home and not any other assets that the borrower may have. If you wonder why the banks are writing off Billions, it is often due to non-recourse loans where the borrower had nothing down and nothing to lose.

Housing will have a second downfall. Once the inventory glut of current non-sold homes is liquidated (about 24 months average), the inflation factor will in the mean time have driven building costs through the roof. So here is the scenario. Lenders will remain leery of loose lending practices and actually have the audacity of requiring a down payment. How ridiculous, the next thing will be requiring proof that the borrower can actually pay them back.

In the mean time, our built-in inflation will drive everyday living costs well beyond what we are experiencing today, making saving nearly impossible for the average person. Wages will not rise accordingly. Real purchasing power will continue to decline as an excess labor pool vies for fewer good paying jobs.

Government (seeking re-election to avoid gainful employment) rather than embracing the real issues, will continue to attempt to turn the tides by using bales of tax money to build weak levies against the inevitable rising costs that are built into our economic system of exponential growth. Residential housing in the mean time will become more and more unaffordable to the point that the average American will not have the means to purchase a home.

So there you have my predictions for residential housing over the distant future. If you haven’t done so, read the free chapter of my book by clicking the “book” button at the top of my home page. Keep in mind that the housing problem had not occurred when I wrote the book.