brainstorm said:
There seems to be little capacity left to comprehend how an economy works when it's not a long-term subsidiary of appreciation-driven fiscal stimulus. Nowhere in economic theory, that I am familiar with, does it say that persistent appreciation of property values is a requirement for supply and demand to function properly.
Property value appreciation is largely a fuction of decreasing land near population hubs as world populations have grown over the last 10,000 years in response to our switch from a hunting and foraging lifestyle to an agrarian and industrialized one. Between about 70,000 BC until the time we developed agriculture, http://en.wikipedia.org/wiki/World_population" had stabilized at approximately one million people worldwide. We're currently around 7,000 times greater than that. Such is the miracle of our age.
What is happening, however, is that the long trend of property-market appreciation has resulted in psychological resistance to imagining the deflationary trend could be anything but temporary. Couple this with the fact that there are extreme precedents for fiscal stimulus to ensure re-inflation, including pre-wwii new-deal programs, leading up the the creation of the military-industrial complex, and Freddie/Fannie as dispersion mechanisms to ensure the widespread distribution of government-stimulated income.
Money has probably been around longer than civilization, with makers of tools or skilled hunters perhaps trading their handiwork for meals. We're only two steps away from this barter economy. The first is the physical money step, wherein money is used in place of bartered goods. The second is the abstract money step, wherein dollars exist only as bits in a system which absolutely must be kept stable lest our world as we know it were to come crashing down.
Interestingly, barter economies work best when coupled with generosity, "lagniappe," as it were. Without it most of our society would be in the have-nots, oppressed, poor, and downtrodden, beholdent to those at the top in some way.
What it means is that everyone works a little harder than is necessary for one's own existence, and as a result, there's always a bit more of everything to go around. One of the best models of this in our modern world are the Amish.
It is not inconceivable we may one day return to a barter system based on man-hours, possibly at standardized rates for various commodities. An apple, for example, might be worth 0.03 man-hours, while a 3,000 sq ft ranch house on a quarter-acrew lot might be worth 10,000 man-hours. The man-hours would roughly reflect actual man-hours required for all aspects of development. Expert services in disciplines which are needed but in which few people have the skills required to become an expert might reflect the actual time and effort required to attain those skills, or they may be left to the economics of a barter economy.
As there are only so many hours in a day, "salaries" would flatten considerably, but we've seen this trend already. The salaries disparity between school teachers and engineers has been narrowing, and while each require different skill sets, both avenues require roughly the same level of time and effort to attain and remain current or qualified.
People are simply no longer capable of believing that government WON'T intervene in some way that re-establishes persistent inflation and therefore appreciation of their properties.
If the government would stop intervening at the drop of a hat, this belief would rapidly evaporate. However, that government wouldn't remain in office very long. Two hundred twenty-four years ago, our government had little ability to redistribute the wealth, so when deciding who to elect to office, most people's idea of our government was one of "what's best for our country?" as it was generally thought that what was best for the country would be best for the state, county, and municipality. These days there are so many programs designed to redistribute wealth that most people look at "what's best for me?" Little has changed in the minds of the people. It's just that there are so many programs for wealth redistribution that the demographics and political ideals of those who're elected to office have changed.
Eventually, either the economy will have to adjust to reset all costs of property-ownership to make them attractive as hobby property OR something will have to happen which makes it likely for them to generate income either as rentals or sales.
Agreed. I seriously considered either buying or building a house when I moved back to the U.S. last year, but between the economy and the way my finances are arranged, it meant both a lot of work (houses are a lot of work) and a reduction in freedom with my time. As it was, I chose to move into an apartment. I sometimes cringe when I consider the fact I'm not "building equity," but when I add up all the variables, especially the hidden ones which take so much time, it's pretty much a wash.
Of course, for people to occupy multiple residences, other factors also come into play such as the ability to structure employment around seasonal migrations, etc. Presumably if people could afford to work someplace warm in the winter and/or migrate someplace cooler for the summer, they would. But this would also create a heavy burden on infrastructure, including oil-supply distribution, unless a highly space-efficient and fuel-efficient form of long-distance transit became dominant. I'm thinking this would either involve electric trains running on nuclear power or something more radically energy-conservative such as nomadism where people spend several months/year hiking between destinations.
As for http://en.wikipedia.org/wiki/Fuel_efficiency_in_transportation" , electric trains are very efficient, at an energy equivalence of between 400 and 700 pmpg (passenger mpg), but that's only when fully loaded and on cross-country trips. Trips with multiple stops are far less efficient, and hotel power (lights, air-conditioning) add a 35% penalty. One might think walking is efficient, as 228 pmpg, but given the many months a cross-country trip would make, it's not. Cycling actually gets 630 pmpg, and most people in decent shape could cross the U.S. in about a month.
The most efficient way to travel cross-country is to ship your vehicle in a car-carrier on a sleeper train, but this isn't the least expensive way to go. Amtrak hasn't cracked the nut on how best to do this, yet.
Sustained nomadism is actually not as an obscure a possibility as it may sound, considering advances in IT that could allow people to work en route using portable media, for example, or planning a work schedule that would allow them to work a few weeks in each city over a series of intermediate destinations. This would, of course, involve radical innovations in management and human-resources, etc. People would have to have places to stay, en route, for example, which would require maintenance and housekeeping on a scale that would exceed the capacity of existing motels and campgrounds, especially with current standards of housekeeping (fresh towels and sheets every day!).
While technology enhances mobility, I envision technology reducing nomadism, not increasing it. My grandfather was district sales manager for a large company for the last twenty-five years of his career. The days of wide-ranging traveling salesmen, however, are largely over. True, a lot of specialized IT apps require on-site installation, but while some of that is increasing, support and maintenance functions are largely handled remotely via VPNs.
Being out on the road is expensive, and hiking across country is far more expensive than driving it due to the cost in time, food, and gear. For example, I can travel from here to California in three days, costing me about $100 in hotels and food, with vehicle costs being the most expensive at about $276 in gas, oil, tires, and other direct wear-and tear items. Assuming an average, $50,000/yr in wages, the time cost comes to another $450 to $600, depending on the days travelled!
Total cost: nearly $900, and that's just one-way! $1,800 round-trip.
If I were to hike there instead, the cost in time alone would be more than $25,000. Add in meals, shoes, gear, etc., and you're looking at a $35,000 trip, minimum, one way, for a $70,000 RT cost.
Yet I can fly there and rent a car for a week, staying in a hotel, for just $750 RT. Peanuts, by comparison.
Nomadic lifestyles are NOT cheap. It's one of the reasons our world was only able to support (or we were able to support ourselves) a million humans in hunter-gather mode, while it can support 7,000 times as many humans in agrarian mode.
