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JHK: Fiasco of Suburbia - Part 2


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The Fiasco of Suburbia, Its Implications, and Its Destiny, Part II

By James Howard Kunstler

 

The American suburb was the greatest misallocation of resources in the history of the world….Why? Because it has no future, because we're not going to be able to run it….We don't have the resource base to run it.

 

A lot of the delusions that are now rampant in the country all focus on the alternative energy scene. I want to be very clear about this, I am in favor of alternative energy. I think we're going to do everything we possibly can. But the key to understanding alternative energy is this: First of all, we are going to be disappointed by what it can do for us, and second, it is not going to change the fact that we have to make other arrangements for all the important activities of daily life…..

 

We're having an incoherent conversation about that about in our society right now because of the psychology of previous investment. We've invested so much of our wealth and even our identity in the [existing American] way of life that we can't imagine letting go of it…But the "project of suburbia" is over as a period in our history and the home builders are going down and they will not be coming back. We're in the process now of losing somewhere between $1.5 and $3 trillion worth of capital. That capital is going to be lost. It went into a black hole and things don't come out of black holes. We're not going to have money to lend to people, least of all for mortgages. In fact, the whole idea of mortgage in America may be similar to what happened back in France after the Mississippi bubble. They didn't even use the word "bank" for 150 years, it was such a toxic word.

 

And apropos of what Kevin Kerr said earlier in the day, we are facing a huge problem with food. All of the systems of our daily life are going to have to be reformed, whether we like it or not….really. We're gonna have to grow more of our food closer to home. The age of the 3000-mile Cesar salad is over! We don't know how much food close to home we are going to have to grow, but at least more than we do now…. probably a lot more…This is going to change completely our idea of how we value our rural, so-called undeveloped, land. Right now, we're still in the frame of mind where undeveloped means undeveloped for suburban crap. But that's going to be over. From now on it's going to be land that has needs to be used for agriculture…

 

But let me step back for a moment, just to give you an idea of the differences between suburban development and urbanism. In suburbia, everything is rigorously and relentlessly segregated from everything else. You're not allowed to live near the shopping; the school cannot be anywhere near the business. Everything is separated and everybody has to get in the car and go out to the "collector boulevard" then go into the pod, whether it's the education pod, the business pod, the housing pod and we can't do that anymore. We can't afford it, especially from 38 miles outside of Dallas and Minneapolis. By contrast, traditional urbanism networks of interconnected streets mix use with people living close to the schools, the shopping and the business and it will become self-evident that very soon that that is superior way to live…

 

We don't know what the city of the future is going to be like, but I believe our large cities are going to contract substantially, even while they "densify" at their centers…And one of the things we're going to learn again, as the automobile begins to diminish its presence in our life is how wonderful the composition of the urban block can be, because the center of it is not gonna be for parking…We are going to re-learn the design and assembly of human habitat and that too will be a self-organizing process, as we're compelled to respond to the circumstances of the global energy emergency…

 

/more: http://www.howestreet.com/articles/index.php?article_id=7145

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Large cities are going to contract substantially, even while they "densify" at their centers…

 

And one of the things we're going to learn again, as the automobile begins to diminish its presence in our life is how wonderful the composition of the urban block can be, because the center of it is not gonna be for parking

======

MORE:

 

We need a self-image that informs us, that we're confident, and that we are competent and that we are capable people. And that's why one of the first things we have to do is rebuild the railroad systems in America, 'cause its the one thing we can do right away that will have the greatest impact on our oil use. It will put thousands and thousands of people to work in all layers and skills. The infrastructure for running it is lying out there rusting in the rain and it's the one project that we can do right away that will allow us to demonstrate the we can actually do something. We can do a collective project as a nation, as a society, as a people that can actually accomplish something important at this time.

 

You know… the kids in the college lectures are always asking me if I can give them hope. And the one thing that the college students don't understand is that they have to become the generators of the hope. They have to generate it themselves within themselves by demonstrating that they are capable people who understand the signals reality is sending to them about the kind of world they are going to be living in the next 20 – 30 years…

 

We gotta build a different world here in North America now and we don't have any time to waste. We don't have time to be crybabies about it. We don't have time to point fingers. We have too many things to do right away. We gotta reform the way we produce our food; we gotta change the way we do commerce and trade; we gotta change the way we get from point "A" to point "B," and we have to inhabit the landscape differently and, as far as this group is concerned, we gotta find a way to do finance that's not based on getting something for nothing, 'cause that is what has gotten us into this situation we're in now.

 

 

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Below is a chart (courtesy of Austrianenginomics.com) that visually shows you what our total credit market debt is as a percentage of our GDP. Look closely and you will realize something very interesting when comparing the two spikes (the first starting after the Great Depression & the second from the past few decades as our economy was driven by debt & credit):

 

total-credit-debt-percentage-gdp.jpg

 

The use of debt in the 1930s was a direct response to the Great Depression! We used debt to get us out of the depression. Recently, we used debt for an entirely different reason: TO SUSTAIN ECONOMIC GROWTH! My two questions are, who are we going to borrow from this time to get out of this mess + how are we going to service our current levels of debt?

 

 

NYC Land prices rushed up too into 2006-7

 

nyc-land-prices-nyc-real-estate.jpg

 

According to Mish Shedlock, that was driven mainly by agressive lending:

 

Yea, thats right. That huge runup that you are looking at above is the amount of debt that we have taken on to fund our growth for the past few decades. This is giving the term 'peak credit' a whole new meaning isn't it!

 

When you hear Mish discuss peak credit and credit deflation, now you know what he is talking about:

 

Peak credit has been reached. That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.

 

Some choose to call what is happening "credit deflation". In this regard "credit" is an unnecessary label. Deflation is about the contraction in money supply and credit. The conditions now are very similar to what happened in 1929. The primary difference is that prices of many goods and services (notably energy and food) have been rising.

 

So where does this leave us? Unfortunately, we are far from finding out as we are only in the beginning phases of credit deflation and credit destruction. The system that has drained every ounce of umph from available credit, is in fact, broken. That is why you are not seeing lending rates fall with the 325 basis points of fed easing seen thus far, and instead, seeing tightening lending standards implemented. It's a new world of tighter credit and higher costs of credit. For now, we still need to let the process unwind, delever, re-price risk, or whatever you want to call it.

 

That is what worries me. How bright is our economic future when the credit system is deflating, the cost of credit is rising, and we already took on huge loads of debt? Lets face it, we have been a society built on credit, and now:

 

a ) credit is contracting

b ) the cost of debt is rising

 

/more: http://www.urbandigs.com/current_events/

 

=====

 

Then they woke up,

and realised the Money had been wasted on an unsalvage-able "Suburban Project"

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In fact, the whole idea of mortgage in America may be similar to what happened back in France after the Mississippi bubble. They didn't even use the word "bank" for 150 years, it was such a toxic word.

 

Yes, I can not shake the feeling that it is all about deflation... all this talk of money printing is their attempt to reflate the asset bubbles. No doubt this will be a futile enterprise and only serve to deflate the power of money [when looked at from a monetary perspective this is inflationary; more units of money, each unit worth less].

More [illusionary] wealth is being destroyed than can be replaced.

 

I can not help but think the bigger story is deflation and depression. Whether it will be a depression or a greater depression remains to be seen. I recently read of the distinction drawn between a depression and a great depression; if a remember correctly, a depression is where there is 10 or 20% unemployment with a great depression apparently going beyond this.

 

It was when I first saw that graph showing debt levels compared to GDP [with the comparison of today to the twenties] that convinced me of the "winter" we are facing. Hmmm... but I thought that rampant debt-fuelled speculation of the twenties was a main contributing factor to the deflationary collapse that followed. Have a book coming on the depression. It is at the top of my reading list. :rolleyes:

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"But let me step back for a moment, just to give you an idea of the differences between suburban development and urbanism. In suburbia, everything is rigorously and relentlessly segregated from everything else. You're not allowed to live near the shopping; the school cannot be anywhere near the business. Everything is separated and everybody has to get in the car and go out to the "collector boulevard" then go into the pod, whether it's the education pod, the business pod, the housing pod and we can't do that anymore. We can't afford it, especially from 38 miles outside of Dallas and Minneapolis."

 

The days of the POD PEOPLE are ending.

When will the average Joe realise this fact ??

 

"I can not help but think the bigger story is deflation and depression."

 

What could be a bigger story than the end of the US suburbs?

The dreams being lived out there have flooded the world with buy orders for "stuff"

 

See- George Carlin on stuff

 

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