Monday, September 17, 2012

Our 200 Year Plan for Economic Prosperity

Click to enlarge.

Why do I suspect that it is our plan?

That's easy. I was curious what the chart would look like but I didn't actually have to calculate the data myself. Note that it is broken out as the last line item of Table B.100 Balance Sheet of Households and Nonprofit Organizations (pdf). Apparently I'm not the only one who wishes to see it.

The first table in a file is generally where the good stuff is. Check!

The last line in a table is generally where they put the really good stuff. Check!

Our founding fathers would no doubt have been so very proud of our ability to embrace debt as a way to gloss over any long-term financial difficulties we might have. Organizing it neatly within tables for the benefit of the general public is just a bonus!

As seen in the exponential trend lines, we are definitely sticking to the plan so far. Isn't it wonderful?

Source Data:
FRB: Z.1 Release


Troy said...

What I always find amazing about any nation's real estate balance sheet is that in every case said national population has been there for a very long time, often before recorded history began.

Yet people still owe money on their mortgages!

When I first discovered the Georgist argument it was like putting on the They Live glasses . . . how the world was really operating became much clearer -- and much uglier, too.

Denmark is running a generally reasonable state, yet it's leveraged to the gills thanks to their mortgage bubble. Denmark is NAMED for the Danes, yet even after a 1000-plus years everybody's still in hock.

Land is certainly a squirelly form of wealth! That's certainly another theme I want to explore in my econ sim game. . . . show me who owns the land, and I can tell you who's running the show, LOL.

Maybe after Windows 8 kills Microsoft, all that pine-scented land up by you will get a little less stratospheric . . . lord knows the iPhone has made anything near Cupertino double in value, gah. Well, that and interest rates being cut in half.

Troy said...

From the above article link:

"In an interview in Washington on Tuesday, Dutch Prime Minister Mark Rutte dismissed worries about the Netherlands' mortgage debt. "It's not a big issue…if you look at the whole picture," he said, noting that the Dutch have saved as much in their pension funds as they have in mortgage debt—"and we have huge private savings.""


"Economists lay part of the blame for the Netherlands' high household debt levels on the tax deduction for mortgage interest. The policy, similar to that in the U.S., inflates real-estate values, many economists say"

it amazes me that anyone disagrees with this. Well, I guess NAR's economists would disagree.

You know what the Ministry of Finance did in 1990 to halt Japan's real estate price bubble? They added a new regulation stipulating that banks couldn't extend more in new mortgage lending than they were lending in other credit lines.

That kicked the market in the centerline, lemme tell you.

But here we've got our Fed actively pumping the market. Gah.

Stagflationary Mark said...

Troy, was like putting on the They Live glasses...

The glasses started hitting the side of my head in 2000. In 2004, the angle was just right and they slipped onto my head. They are stuck now. I can't seem to get them off, lol.

Maybe after Windows 8 kills Microsoft, all that pine-scented land up by you will get a little less stratospheric...

The eastern side of the state seems fairly reasonable last I checked. That's especially true in the "bring your own job" small farming communities. Might be a perfect place for building a dream sim (and/or doomstead).

As a side note, I may have been scarred for life by seeing out-of-towners start new local grocery stores that would go head to head with the existing larger local grocery store. It never seemed to end well for the new business.

One such out-of-towner installed Asteroids and later Star Castle. I was just about the only one who played. The return on investment must have been awful. I got down to 25 cents per day relatively quickly.

Stagflationary Mark said...


Well, I guess NAR's economists would disagree.

I love that the NAR's Housing Affordability Index is based on how much the payments are compared to *current* income (assuming no loss of job by *any* member of the family) and *not* how expensive the house actually is.


mab said...

Speaking of land owership:

I know of a mechanical force more powerful than anything the vaunting engineer of Syracuse ever dreamed of. It is the force of land monopoly; it is a screw and lever all in one; it will screw the last penny out of a man's pocket, and bend everything on earth to its own despotic will. Give me the private ownership of all the land, and will I move the earth? No; but I will do more. I will undertake to make slaves of all the human beings on the face of it. Not chattel slaves exactly, but slaves nevertheless. What an idiot I would be to make chattel slaves of them. I would have to find them salts and senna when they were sick, and whip them to work when they were lazy.
No, it is not good enough. Under the system I propose the fools would imagine they were all free. I would get a maximum of results, and have no responsibility whatever. They would cultivate the soil; they would dive into the bowels of the earth for its hidden treasures; they would build cities and construct railways and telegraphs; their ships would navigate the ocean; they would work and work, and invent and contrive; their warehouses would be full, their markets glutted, and:

The beauty of the whole concern would be
That everything they made would belong to me.
- Mark Twain

There's more:

Illusion of Freedom! Genius!

mab said...

Who understood the power of "leverage" better, Twain or Archimedes?

Troy said...

When I moved to the SF Bay area in mid-2000, the land market was bonkers, with landlords raising their rents faster than they could update their online listings.

This was still before I had discovered Henry George so I was operating under the thesis that everything we did in America was capitalism, and American Capitalism was Best Capitalism, so there was nothing to be done but wait for the Market to sort things out.

Now, supply has increased lo these 12 years. But rents have doubled, LOL.

The land tax being pocketed by landlords has been a marginal thing for the past 100 years so it has largely been under the radar, and the society is corrupted by the free money in real estate -- everyone got a piece of the action last decade and everyone now wants another hit from that pipe.

One interesting thing i learned was that the thesis that "all taxes come out of rents" (and land values) was in fact supported by what happened when Japan raised the consumption tax from 3 to 5% in 1996. The tax applies to fixed improvements, and once the rush to buy houses before the tax hit subsided, prices went down!

Buy now to beat the consumption tax increase … or don’t

As for living east of the cascades, I have family on both sides (father's had apple orchard in Yakima) and West is Best, LOL. Plus I've heard some disappointing things on how the dry side has changed since I was last in WA (1989).

Even tho I'm a native Californian, both my parents were born in WA and my family has a creek named after them (visible on Hwy 12) so that should count for something!

Stagflationary Mark said...


Twain's the man!

Stagflationary Mark said...


When I mentioned Eastern Washington I actually meant all the way east. That said, I chose to live in the west.

If you can make it there (Seattle) you can make it almost anywhere (not New York perhaps, lol). Put another way, I thought it would be better to earn more in a high cost of living area over a career than a smaller amount in a lower cost of living area, if only for the early retirement potential and increased retirement mobility. It would be difficult to retire in Seattle if I spent my life working south of Spokane.

I lived in Sunnyside to the age of 6 (just 35 miles from Yakima). I'm guessing it has changed a lot in the last 42 years. Last thing I kind of remember is racing a tricycle down a steep street with my parents chasing after. I say kind of, because my memories mostly come from my mom retelling the story every few years since then, lol.

(Nothing bad ultimately happened but there was some serious parental trauma apparently. ;)

Stagflationary Mark said...


Shiller is also the man! He was just on CNBC this morning listing off all sorts of concerns about our future.

They asked him what the odds were that his good friend Jeremy Siegel's bullish predictions were right. His answer? 45%! No joke!

Stagflationary Mark said...

From where I sit, if a good friend said he could only agree with 45% of what I just said, I'd be tempted to think that he thought I was wrong, lol.

mab said...

His answer? 45%! No joke!


Maybe Shiller was just being polite. Or maybe he actually said 0.45%.

Twain is the man! So is Orwell! Einstein......not so much.

Troy said...

My great-uncle was police chief in Sunnyside. I can find an article referencing him in the Tri-City Herald, LOL.

Not sure what my family's politics are up there, but they all worked for the government in some capacity or other . . transportation department, airbase civil employee, postmaster & fire chief, fire marshal, police chief LOL.

I'm thinking Bellingham gets me far enough away from the Redmond money bubble to be workable. Where you are now, not so much! Complicating matters is that being within one hour of a Trader Joes is probably non-negotiable. I can get my staples at a Costco maybe, but Trader Joes has the stuff I actively like.

If I move to Japan I'll need to pay someone to kick off a box of stuff from TJ's every month to me, sigh.

Anonymous said...

Bellingham has a different sort of money bubble going on, sorry!

Stagflationary Mark said...


I really like Shiller. He's a bright guy who exudes humility when he speaks.

In sharp contrast, Siegel exudes hubris. Just an opinion of course.

If hubris got us into this mess, then by God hubris can get us out!!

Or not, lol.

Stagflationary Mark said...


My great-uncle was police chief in Sunnyside.

That's amazing. You are dramatically shrinking my world!

Stagflationary Mark said...


I'd love to know your thoughts on Bellingham. Do share!

Anonymous said...

Bellingham's large home price increases cannot be supported by incomes in the region. They are hoping to attract 'green' dollars from the feds for 'sustainable ag' along with getting Canadians to retire there and etc.

Bu it's too small to become a commuting hub itself and too far away from anywhere else to be a full-on bedroom community. And it doesn't really have the best infrastructure to be a retirement hub either. They nourish their own illusions of prosperity on a small scale, basically.

Stagflationary Mark said...


Bellingham is 90 miles from Seattle!

I've been there no more than twice in the last 15 years. The one time I can remember I was on my way to Abbotsford in Canada to see an air show many years ago. I never actually stopped in Bellingham though. Go figure.

On an anecdotal level, your commentary makes sense to me. I'd certainly never commute that far, especially when I think what the future transportation costs might be. I also never pictured myself heading to Bellingham to retire. I did toy with retiring along Washington's coastline to the west though. We used to camp in Kalaloch when I was a kid. Fond memories!