rruff
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- Mar 9, 2019
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When there is a divergence between the profits and worker income, the rich inflate assets with their excess cash. They can't invest in productive capital because sales are limited by consumer's ability to buy. For a long time they were able to keep the ball rolling with easy credit, more women entering the workforce, and escalating fiscal spending... but these have run their course.The chart showing home prices and rent vs. household income says it all.
The big asset getting inflated is RE. It affects not only the price of housing, but costs for every business that needs land... which is most of them. So it's a double whammy for people experiencing declining real wages and increased real costs.
Higher wages, higher taxes, and higher public benefits would take care of our economic ills. Ironically during our most successful period and easily the best period for the middle class, the first two were accomplished with high union involvement and high marginal tax rates. Our unions in the US were terribly inefficient and antagonistic compared to the most in the world, but we prospered anyway!
This is one of those things that is best left to the market. If people vote to keep out apartment complexes, businesses will not be able to hire burger flippers and toilet cleaners unless they pay extremely high wages... which will ultimately be paid by the same people voting against apartments. Or these businesses will disappear and the people there will have to do without those services... which will not help their property values. If you "solve" the "problem" with federally funded low income housing then you reward this bad behavior, because the cost gets diverted to taxpayers from somewhere else. Besides that you add a big layer of government bureaucracy expense, along with the unfairness of having qualifications for housing based on income.NIMBY attitudes keep us from building low cost multiple family buildings where they are needed because it might impact the value of the Mc Mansions built nearby. Or approving more inexpensive mobile dwelling spaces. I think more builders would build lower cost, and therefore lower rent, buildings if the rules in place allowed them the same profit. Planing and zoning policies and financial requirements do not match actual needs - unless it is the needs of the established and successful folks fighting against any meaningful change.
I'm really disgusted by the rich people who keep touting the free market when it suits their bank account, but want government help in these situations. And they pretend it's "for the poor"... and people are dumb enough to believe it!
There is a point at which the cost of housing and wages will meet an equatable level in local situations. Economic issues are much easier and fairly dealt with on a macro level.