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Wednesday, May 02, 2007

The middle class dreams

What did really drive the economy in the 80s and 90s?
Mostly it was the middle class dream, the middle class power, the middle class energy.
What will destroy the economy in this century?
The fall of the middle class, with its dreams, its power, its energy.

"By the 1980s, both parents had to be out of the house generating income to pay the mortgage and especially to pay for the multiple cars needed to service the family headquarters. Mom went to work not because Betty Friedan said that actuarial science was more fun than managing a house, but because wages were stagnant and Dad could no longer make the family's ends meet."

Finding a job was easy because you had people who "had to consume" and people who "had to produce because somebody wanted to consume".

"Everybody need a home, the logic went, including those who ordinarily wouldn't have qualified for regular mortgages that required substantial down payments, proof of employment, and other formalities.
So the answer was to engineer a financing modality that would allow anyone to buy a house -- and thereby ramp up the "homebuilding" industry into super-hyper-turbo-overdrive, which would incidentally generate even more potential house-buyers among the many framers, trimmers, plumbers, electricians, painters, real estate agents, and sellers of Corian countertops, who made good wages or commissions on delivering the "product." Meanwhile, the new housing pods in evermore remote locations, where there were no towns, could be accessorized with all the requisite service infrastructure -- new highways, strip malls, Pizza Huts, WalMarts, Best Buys, and video rental joints, all of which had to be built by somebody, making for additional contracts, incomes, and potential house-buyers."

"The whole racket floundered when several things changed or went awry. One was the sheer saturation of markets. Sooner or later, everybody who might possibly buy a house, got a house.
The next thing that went wrong was affordability. If absolutely everybody's house rose ten percent in value every year for years and years -- including every "pre-owned" raised ranch shitbox -- then sooner or later every house in America would cost at least half a million dollars.
The final problem would come when central bankers had to raise interest rates so that customers for debt would accept the risk of investing in a national economy that was increasingly seen to be based on the engineering of modalities to get something for nothing."

And if the economy is built on a class and that class disappears, than the economy crashes.

"The housing bubble began to collapse at exactly the moment that the world reached its all-time oil production peak: the summer of 2005."

If that was the only reason, the housing bubble wouldn't collapse.
You can find a replacement to oil, you can save on it, you can find an alternative way of working.
Commuting people or at least a big part of them can easily work from home.
Yes, in the meantime the telephone bill got cheaper, the broadband lines arrived in every small village (or they will arrive soon), the mentality of the managers changed or will change.
Living in the city, just to save on oil is not the answer.
As it is not the answer concentrating all power and resources in few hands.
The Middle class is not finished, beware big dinosaurs, if the middle class era ends, also your power will end.
A species extinguishes not because is eaten by the predators, but because the species it relies for foods extinguishes.
That is: if you loose your customers because they won't have the money to buy your products, how are YOU going to make profits?
That is exactly the reason why there are big economies emerging on the Market: China and India.
The food for the predators is good and abundant there.
China has 1 billion2hundredmillions and India, I do not know, but I can imagine...
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