link round-up

[cellio]

Maritan Headsets (from Joel on Software) is a long but worthwhile article on software standards -- both not having them early enough, and having them and trying to enforce them. Parts of it made me laugh out loud, like the paragraph containing this passage: "[...] but of course when you plug the headphones into FireQx 3.0 lo and behold they explode in your hands because of a slight misunderstanding about some obscure thing in the spec which nobody really understands called hasLayout, and everybody understands that when it's raining the hasLayout property is true and the voltage is supposed to increase to support the windshield-wiper feature, but there seems to be some debate over whether hail and snow are rain for the purposes of hasLayout..."

Rescue me: a fed bailout crosses a line seems (to this non-expert) like a good analysis of what just happened to the market and the dollar. (Need a login ID? Try BugMeNot.) I am more scared, and more angry, about our government's economic policies than I've been in a while. As someone on my subscription list said (I forget who), the people who actually took personal responsibility and saved rather than spending recklessly are the ones who are going to get hammered by this, while the idiots who bought houses (or corporate holdings) they couldn't afford and racked up tons of debt will be bailed out because we can't stand to say "too bad you were an idiot".

As long as I'm saying "too bad"... too bad, Michigan and Florida. Agreed.

On a lighter note: Garfield Minus Garfield is surreal. And since seeing it a week or so ago, I haven't been able to read Garfield "straight".

Comments

[cellio]

I apologize for the tone in my post. A different choice of wording would have been better. And I do hold reckless lenders accountable too, not just buyers.

Clearly I don't have a good understanding of housing prices on the coasts. When we bought our house the bank was willing to lend us more than twice as much as we spent. We did the math and it was obvious we could not afford that. We had a choice; we didn't have to spend nearly that much. I think we would have been idiots to sign up for the loan the banks were offering.

In most other areas, when desires exceed means we forego the desire. Housing seems to be different. Granted, if you don't buy you'll be paying it in rent anyway, but it still seems like we -- by which I mean both society and government -- place too much emphasis on home ownership, and I suspect that drives the price up. How did we even get into the situation where the going rate for a modest home is half a million dollars or more? The conventional wisdom at the time I bought was "max three times annual salary", and most of the people buying those houses don't have that. "The market" forced prices up that high, but "the market" is really just people willing to buy and banks willing to lend. What happened on the coasts that didn't happen in other areas, like Pittsburgh? I don't know, but it seems like it's important to understand.

[sethg]

I think one issue is that in the parts of the country that have been very overheated (Boston, the Bay area, NYC), there's hardly any undeveloped land left, but lots of people want to live there.

Another issue (not geography-specific) is that new esoteric financial instruments made it more attractive for investors to hold subprime debt (or at least, for them to hold esoteric financial instruments that held subprime debt), which created a demand for such debt, which created incentives for banks and brokers to loan money to anyone with a pulse.

And of course there were the usual sophisticated computer models that proved that everything was perfectly safe.

[sanpaku.livejournal.com]

Well, it's just the market. We can't be all pro-market when we like it and anti- when we don't, right? So the market is just shorthand for desire and supply. A lot of people want to live here and also want detached single family houses in nice areas with good schools. On a macro level, all of those things are scarce relative to desire. I can't give good sources but basically my sense is that the supersizing of desire (big house with lawn) plus the implosion of cities (schools and denser housing stock) plus wish to live in the general area equals high housing prices over the past 30 years. Also, as with any market, there have to be people willing to fuel the bubble, which is where the banks come in.

The part I feel stupid about is that one thing I felt was driving the market here was proximity to Boston -- the sense that people I knew were using RI as a cheap bedroom community for a Boston commute. Now I see that population in RI has actually started going down. So I was wrong about that, and the housing cost increase was driven purely by market pressures.

Housing is different in that government and society value home ownership as a positive good and provide a lot of the werewithal to you to get in over your head. Also, they're supposed to be different in that there's a stickiness to prices going down -- as my dilemma clearly illustrates, if I have to give the bank money that I don't have in order to move, I'm staying put. I don't think any of us fully, uh, appreciated that these are only brakes and not floors on the market.

And who is immune? I have always loved cities and was happiest in apartments, and yet here I am with a house that is falling apart and a yard I can't manage. There's something in the fact that everyone else is doing it and you measure your life that way, whether you want to or not. There's also something that home ownership, like having kids, is one of those existential struggles that people undertake to prove that they can triumph over challenges. So these popular delusions are just almost impossible to avoid.

Anyway, if you use the three times salary metric, we are only marginally overleveraged, but then there are all the other costs of home ownership such that it is very hard. My point is that when you are talking about such a massive amount of money, all these things are only yardsticks. Everyone made their own choice. Some of those choices were stupider than others, but most of the stupidity is truly apparent only in retrospect. Clearly we are all getting some lessons now in the difference between the apparent and the real.

[osewalrus.livejournal.com]

I've generally agreed with you, but need to add one thing. It's not just the market, it is also policy.

We spent the last ten years dismantling all the Depression era laws that were designed to enhance transparency, promote corporate accountability, and create firewalls within the economy so that if one sector (like banking) collapsed, we would not see it spread to other sectors.

We adopted as our national industrial policy consumer-based policy that relies extensively on consumer spending and consumer debt. We made money cheap, we created incentives to buy homes, we praised the "ownership society." And people, rational actors that they are, responded. Then we compounded folly by allowing unscrupulous lenders and appraisers to collude with buyers to get people into homes they couldn't afford -- all the while soothing folks with "don't worry, everyone does it, if it were a problem we couldn't do it."

And this is only one piece of the puzzle. The dollar was falling well before the subprime crisis came out into the open. Our disintegrating infrastructure, the increasingly cartel-like nature of our economy, or uncontrolled deficit spending, and levels of corruption and graft via contracting unknown since we eliminated the spoils system of civil service, were also catching up with us. If we were a developing nation, we could not get an IMF loan.

The signs have been visible for years. And some of us have been crying our warnings in the wilderness. But most folks refused to have the necessary conversations.