One of the oddities of the standard narrative of the Housing Bubble is how it glosses over just how regional it was. In large expanses of America, there wasn't much of a Bubble at all. The New York Times reports on the economy in North Dakota, where there was no Housing Bubble, no subsequent Mortgage Meltdown, and no Financial Catastrophe ... so far.
I suspect that North Dakota is, like everywhere else, in for hard times and that its current prosperity is an afterglow of the now vanishing Commodities Bubble of 2007. When the Fed discovered in the middle of 2007 that the economy had become a house of cards built on subprime and/or pay option mortgages in the "Sand States" (FANC -- Florida, Arizona, Nevada, and California -- as in "FANCs for the mortgages, suckers!"), it "printed" a lot of money to try to head off recession. That new money, with nowhere else to go, flooded into commodities, causing oil to hit ridiculous prices last summer (so ridiculous that even I wrote about them), and inflating a lot of other commodities such as grains.
Nonetheless, North Dakota still has a big long-run advantage: a high ratio of land and resources to people. Ben Franklin pointed out in 1751 that this is exactly why life was happier for the average person in America than in Europe.
More than anything else, the Housing Bubble was a bet that rapid Hispanicization of the population of the Sand States was compatible with high and continually rising home prices. This meant, in effect, that either Hispanics could earn enough money to pay off these huge mortgages or that they could find Greater Fools willing to pay even more money to live amidst ever increasing numbers of Hispanics.
As we can see now, neither assumption has proven valid. Home prices in the Sand States are dropping like a stone back to levels at which the increasingly Latino population might possibly be able to afford them.
Of course, the government is now trying to come up with ways to re-inflate housing prices.
My published articles are archived at iSteve.com -- Steve Sailer
Posts
31 comments:
And there you may have your missing explanation of why Bush and much of the political-business class were so eager to ratify illegal immigration and to tolerate more of it. I recall you asking several years ago why Bush was so eager to please the Mexican government on immigration policy. Maybe his reasons were domestic, rather than foreign.
"When the Fed discovered in the middle of 2007 that the economy had become a house of cards built on subprime and/or pay option mortgages in the "Sand States""
I read somewhere that Nixon lifted the Gold standard so the Fed could print the US out of recession back then. Can't remember whether it was the famous OPEC oil embargo or whatever else. If so its nothing new the Fed is doing this. My financial advisor told me the US will just print their way out of the current deficits. Any takes on this?
North Dakota will get drug down but not as far as the states with huge black & Hispanic populations. They've survived worse.
I've heard it said: 40 below keeps out the riffraff.
North Dakota still has a big long-run advantage: a high ratio of land and resources to people.
Steve, I have the utmost respect for your intelligence and knowledge (for example, your book on Obama was flat-out incredible, as are literally dozens of your essays) but please stay away from the economy. Some points:
1) Urban areas are more weathy than rural ones. This is an objective fact.
2) Ideas, not resources, drive wealth. You are trapped back in the "land, labor, capital" fiction...real wealth can be shown to be driven by ideas, people, and things. That is, human capital. This is why Japan - an island with no natural resources - is the second wealthiest country in the world.
The real reason North Dakota will do well in the long run: people. High IQ, high social capital, and wealth follows. The fact that ND is rural is a serious disadvantage. Franklin was all wrong; what made America wealthy was high-IQ invaders, not lots of land (otherwise the Indians would have been rich). Think about it: NY and LA are loaded, and rural areas remain poor. The more high-IQ people you can pack into one spot, the richer you are.
In summary, your fear of immigration on quality of life has nothing to do with a numbers game. It has to do with the culture and IQ of the immigrants.
Oh my god! North Dakota doesn't have enough immigration! You mean that employers may have to pay American citizens higher wages?? The horror! The horror!
North Dakota also has the long-run disadvantage that nobody really wants to live there. When population growth has been approximately zero over the last 90 years, there isn't much competition for housing.
Re-inflating home prices is just a means to the end of saving the banking system. With mortgages continually failing and home values falling, bank assets are continually under pressure, leading banks to hoard money in order to stay alive.
The root of this whole problem is our leaders' focus on the health of banks, and keeping them alive. They are hoarding money to stay alive, and strangling our real economy.
Time to reset the banking system: cancel debt. Many banks will die the well-deserved death they have earned, but our economy will be saved.
Franklin was all wrong; what made America wealthy was high-IQ invaders, not lots of land (otherwise the Indians would have been rich). Think about it: NY and LA are loaded, and rural areas remain poor.
Why don't you go back and read the post? Steve wrote that Franklin claimed the average American was happier than the average European -- not wealthier.
Now if that there global warming kicks in and North Dakota develops a climate like south Texas or Arizona, then you will see a North Dakota housing bubble.
Steve - i have to agree that true wealth is created by the combination of very high iq and very high density. When you cram a lot of very high IQ people together in close proximity the results are spectacular.
Have you been to Hong Kong recently ? Or manhattan ? Both places manage to cram massive numbers of high iq people together - in both places apartments are generally small and the younger high IQ people are literally forced in to public places to interact and trade ideas.
some of the ideas are stupid but over time density plus high iq creates great things
I think Manhattan has proven that many high iq people are willing to live in apartments and have two kids so long as there is very little crime. That is important - it means that providing a house with a back yard is not crucial for reproduction -
Steve, think about a future for Los Angeles of miniature hong kongs built around the subway stops - within a five minute walk of the hollywood and highland subway stop you could have 40 condo buildings each containing a thousand condos - all the people living in this dense environment could forego cars and take the subway to work downtown - this level of density could attract high iq young folks -
certainly Steve you should re consider - low density places that no young person wants to live in like north dakota seem doomed compared to West los angeles since west los angeles has perfect weather, coolness factor, and with some tweaks very high density
Despite the well communicated negatives of LA I would bet on west LA when compared to North Dakota
actually, younger people seem remarkably tax insensitive so the crazy high taxes in california may not make such a difference
Actually real estate prices are still at bubble levels on the coast and wealthy inland areas. They are down 10 to 30% from their peak, but are still more than double the price from 2002.
Given that there are plenty of nice rentals, and rent is less than half of what a mortage runs, prices will likely dift downwards for a long time in coastal CA.
Japan has access to natural resources...though imports. Cut off those imports and we'll see how far their ideas take them.
North Dakota is a great place to live? Ha! Maybe, but if you aren't from there, it can be fairly unpleasant.
I spent much of the month of October in North Dakota (Dickinson and Bismarck areas), hoping to see what a real economic boom region looks like. Quite frankly, the economy there sucked just like it does everywhere else. Lots of low-paying retail jobs, and few that offer the potential of earning solid middle-class wages (a pretty good indication that it can't be too great there is the fact that they are constantly opening up new, low-rent casinos in North Dakota).
But what really struck me is how hostile they are to outsiders. Folks there are polite enough, but they are EXTREMELY suspicious of visitors' intentions. I had some kid from the North Dakota Highway Patrol stalking me for two days (I kid you not) after he saw my out-of-state license plate. He pulled me over twice for absolutely no reason, made me sit in his patrol car, and interrogated me for 15 minutes with obnoxiously asked questions about my reason for being there (incidentally, I have no criminal or arrest record of any kind). I was also warned by about 5 different people each day about the Siberian-like weather conditions there along with the suggestion I wouldn't want to be around there come wintertime. I attribute all of this to the noted anal-retentive tendencies of the ethnic Germans who make up the vast majority of North Dakota's population.
I would strongly suggest anyone considering moving to "booming" North Dakota to look elsewhere for a re-location destination.
Nah, like "Non de Guerre" sed ND residents are ethnic Germans, so they must be racists by definition, right? Especially since they got left behind by the reformist liberal lot post-45 in Germany itself. All the Nazi's are now living outside of Germany!
Well, I know where I'd be heading if I ever decided to go live in the US. If being hassled by a cop means my neighbourhood is safe I cannot see what's wrong with it.
"Anonymous said...
When you cram a lot of very high IQ people together in close proximity the results are spectacular.
Have you been to Hong Kong recently ? Or manhattan ? Both places manage to cram massive numbers of high iq people together - in both places apartments are generally small and the younger high IQ people are literally forced in to public places to interact and trade ideas."
Spectacular? What does New York produce? Musical theater? Collateralized Debt Obligations? Situation Comedies? Gay bathhouses?
New York is a foreign country to most of the rest of America: more important than Togo, less important than Argentina. It isn't that important in any positive sense.
Some other people were mentioning Japan - note that Japan is also well on the way to functional extinction:
IQ and the Wealth of Nations
en.wikipedia.org
#3: Japan, 105
List of countries and territories by fertility rate
en.wikipedia.org
#217, CIA: Japan, 1.22
#184, UN: Japan, 1.27
mdavid said...
“Ideas, not resources, drive wealth.”
You need both. The problem that Germany and Japan have is that they have to import all the raw materials. This was the main reason Germany lost the war: no steel, no oil, no chemicals. Brainpower alone does not cut it. The US became great because it had abundant natural resources, a large, fairly developed population, and high IQ elite. On top the US was lucky in that it could pilfer Germany's best patents and minds (both victims and perpetrators) in 2 world wars (von Brown etc. and Einstein). Maybe the reason the US is falling back is that the countries it invades don't contain the human loot that Germany and Japan offered.
I agree with Steve's angle that manufacturing is still important. Economists predict that Japan and Germany are going to get out of this thing better than England and the US who are more beholden to Wall st. type financing. I'm pretty sure that if Daimler or BMW were up against the wall no pol in Germany would dare questioning a bailout. But then those companies (except for Daimler's Chrysler hangover) are well placed for the coming recession and will out of it flying, along with the Japs of course.
I never quite understood the Dakotas. I have never been there, but from a distance they seem very attractive: low crime rate, an educated populace, and politically conservative people. Let no one lives there and it seems as if no one wants to. Are people just that afraid of cold?
My financial advisor told me the US will just print their way out of the current deficits. Any takes on this?
Eventually, the USG will have to choose between hyperinflation or default, and my guess is they'll choose default. Along the way, they will also take a stab at nationalizing private industry, but the resulting capital flight will put a brake on that.
--Senor Doug
Japan has access to natural resources...though imports. Cut off those imports and we'll see how far their ideas take them.
They only have money to pay for those imports because they have a high-IQ population that has good ideas and knows how to work hard.
"They only have money to pay for those imports because they have a high-IQ population that has good ideas and knows how to work hard."
You are missing the point that results require the complementarity between resource and brainpower. "Ideas" by themselves do nothing.
Urban areas are more weathy than rural ones.
No, nitwit. Long Valuation Waves (see Adam Hamilton's work on zealllc.com) run in 17 year cycles. During stock market booms, urban areas do well. But the underinvestment in commodities during stock market booms drives down relative wealth in commodities producing states.
But then shortages of commodites causes commodities prices to rise and commodities producing states to rise in wealth as urban areas sink.
Each long valuation wave is about 17 years.
1984-2000 was stocks upcycle
Now we're in a commodities upcycle.
North Dakota, as a result of drilling in Bakken Formation is producing a new millionaire every day, which considering the low population, is saying something.
Oh, and the $40 / barrel oil? Enjoy it while it lasts. Peak oil is real, it's here. Traders are insane right now with panic, but with the world's giant oil fields in precipitous decline of 10% / year, any slight rebound, we'll see $80 / barrel overnight.
Oh, and as far as new supplies to replace the declining production from those giant oil fields? Well, $40 barrel is killing those plans. Brace yourself. 200, 300, 500 / barrel is coming, even with negative growth in U.S.
Are people just that afraid of cold?
James Kabala, North Dakota in winter is cold, all right.
60 below overnight in January and the least bit of wind, -90.
My sister lives there and loves it. Keeps out the riffraff. She has a garage with a door opener, a Subaru Outback that goes in snow and the best warm clothing money can buy, and a treadmill in the basement.
But to step outside in those temperatures will make your eyes water, which then freezes to your cheeks. It hurts.
When you cram a lot of very high IQ people together in close proximity the results are spectacular...Have you been to Hong Kong recently ? Or manhattan ?
Someone else already questioned the results in Manhattan so I will ask about Hong Kong. What exactly are modern Hong Kong's original contributions to the world besides a karate film industry? I would like to see a list of "spectacular results" other than the typical white collar paper shuffle FIRE economy (finance, insurance, real estate).
Yes, a lot of paper riches have been generated over there. And the Magna Carta seems to still be in effect as a leftover from British rule. But that doesn't have much to do with "cramming people together in close proximity"......so what else "spectacular" is there that sprang from the great petri dish known as Hong Kong?
Eventually, the USG will have to choose between hyperinflation or default, and my guess is they'll choose default.
I predict hyperinflation. It's just a guess but all the pieces are in place for hyperinflation to commence. We've already got a government that thumbs its nose at the very idea of stable currency (The great and the good insist that steady inflation is healthy.), growing underclass, and a dwindling manufacturing sector. Hyperinflation seems like an inevitability at this stage, but its hard to predict exactly when it will begin. It's analogous to having a category five hurricane brewing in the ocean but not being able to know precisely when it will make landfall. It could still be several years ahead.
Real wealth is created though exports. If you can create something in your nation and export it successfully to other countries and have them pay you in a tangible way, you are creating wealth for your nation.
Example - samsung creates electronics in Korea and exports them all over the world. Samsung creates wealth for Korea
Boeing creates planes in Seattle and exports them throughout the world
Burbank creates moview that are exported throughout the world and generate huge capital iflows for the US
these examples are only possible with high density
low density places can't generate exports with the same high value as high density places
density plus brains can = wealth
Anonymous X,
I disagree on both counts. You have assigned absolute value to two quantities that only have relative value. Exports can be good but they aren't the only source of wealth. Having a robust internal economy is also of benefit. If we considered exports to be the only source of wealth then we would have to judge the earth impoverished since it isn't trading with other planets.
Your claim that population density has some kind of value in itself doens't conform with the law of diminishing returns, which states that we get diminishing returns on a good, and finally negative returns, as is exemplified by choked freeways and smog. In reality, there will be an optimal mix of high density to low density areas.
Nah, like "Non de Guerre" sed ND residents are ethnic Germans, so they must be racists by definition, right?
No, he just said they were uptight. Do you disagree?
Come on, Jews on this board have to constantly hear about their people's flaws, real or imagined. An ethnic German should be able to put up with the odd critical generalization.
North Dakota is actually made up primarily of Germans from Russia (important distinction) and Scandinavian Americans (mainly Norwegian), with Sioux, Chippewa and Mandan, Hidatsa and Arikara Indians the largest minority group. Fargo, the town where the New York Times focused on, has the largest influx of immigrants: Somalis, Mexicans, other groups like Albanians, Kurds, Indians from India, etc. The school district is struggling to deal with a mini explosion in kids who speak English as a second language. The rest of the state is pretty homogenous and its test scores are mid-range if you compare NAEP test scores. Small towns can't always offer much in the way of curriculum choices. A lot of kids go on to college, but it's usually the state institutions and they're usually close to $30,000 in debt when they graduate because the state has some of the lowest wages in the U.S. and parents can't afford to pay tuition.
There are plenty of jobs, but many of them are crappy, low wage jobs that you can't raise a family on and don't get benefits with. A number of people have two or three jobs and the number of people using food banks is rising. There's an oil boom in the area where I live, but with it comes increasing rents and increasing homelessness. There's a shortage of affordable housing. People can't afford to buy $150,000 houses or pay $500 a month rents and landlords are raising prices because they expect to make more money off the oil field workers. People who don't work in the oil fields and have the same crappy jobs as always can't afford it.
Other people are doing pretty well, but there are poor people here just like everywhere else.
North Dakota is a state with weather extremes. Summer temperatures average in the 70s and 80s and occasionally hit the 90s or the 100s. Winters have been more mild here in the last few years. Wind chills are occasionally below zero, but the temps right now are hovering around 20 degrees Fahrenheit. You get used to it. Some people are friendly; some are going to freeze you out. It depends on what kind of person you are and whether you fit in. If you don't, yeah, you'll probably be harassed by bored small-town cops or given the cold shoulder when you try to approach people. You'll probably stick out like a sore thumb if you talk too fast, move too fast, have a strange accent or are dressed too flashily and yeah, if you're black and go to a small town, you'll likely get stared at. I don't know if it's racism so much as curiosity. Some people here seem more prejudiced against Indians than they are against blacks.
Boeing creates planes in Seattle and exports them throughout the world
Seattle and Wichita aren't very big cities.
"When you cram a lot of very high IQ people together in close proximity the results are spectacular..." So how do you account for the fact that the Washington D.C. beltway has more genius I.Q.s than anywhere else in the country---and Washington is chronicall dysfunctional--both as a city and as the seat of government??
Post a Comment