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August 23, 2010


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More good stuff to consider. I smiled as soon as I saw that I had a fresh post to read.

I'd love to shut down Palo Verde and save some of the Colorado River water it evaporates. Replace it with a huge solar install to continue to use the electricity transmission infrastructure.

Also would love to see a company set up a natural gas power plant somewhere on the Sea of Cortez with a desal plant right next door. One pipe for domestic use and another headed north to Tucson or PHX to reduce the need for the Colorado River water.

The damage we've done is cumulative and, to a certain extent, irremediable. It's certainly possible to make a few bad choices and recover later. Much of the nation, however, is governed by ideas that are virtually insane. The craziest idea is that low taxes lead to prosperity, as if Sweden were a hellhole and Eritrea a paradise. Another idea is that the environment we inhabit is not actually real, that we can sprawl indefinitely without cost or repercussions. And yet another idea is that private property is not merely good, it's an absolute virtue. Planning, of course, would be evil.

The right-wing pantheon of Reagan, Rand, and Friedman are the intellectual ballast of this leaky enterprise Sarah Palin calls the Real America. In this vein, Arizona may be the most real place in America.

As noted in Talton's post, we self-select for sun-addled ideologues rather than patient stewards of a public good. So, as time passes, Arizona will become even more crazy, more bitter, and more disconnected from any future worth having. Arizona is in the vanguard of a national movement. Wave your flags, zealots! It's one way to spot you before the waves of this future swamp you.

6) Arizona will continue to haunt our nightmares.

Meanwhile, Doug McEachern . . the Republic editorial writer . . does a quick hit, telling us that the Gulf is healing itself! Everywhere we look, there are opinion-makers with their heads in the sand . . or somewhere even worse that requires the proverbial glass belly button that'll allow them to see out.

Napolitano partially neutralized the wingnuts. Maybe Goddard will get his chance. It is my best hope.

Alas Mr. Hamblin,I fear Goddard is our only hope and probably a 3 to 1 underdog.I have no hope for the legislature as I have waited 40 years for the people of Az. to realize that power corrupts and absolute power corrupts absolutely.We are absolutely screwed.

7). Millions of Americans are going to starve to death. The official policy of the US government is holodomor. The Republicans want Americans to work for the same wage as a Chinese peasant and they will starve millions to force it on us.

Why doesn't anyone talk about the real problem? The US has 40 million more workers than it has jobs. Someone has to starve! Essentially all of the problems that are discussed here are a consequence of that. There just isn't enough money to go around. The generation of privileged retirees doesn't want to pay taxes or sign checks. They want free labor, along with the business owners and corporate management. As a result, Arizona is a mess. So are the other 49 states. The real issue is a Jobs Crisis that no one is doing anything about. The US government chooses to allow Americans to starve, so that businesses don't have to pay them for the work that they do.

I have a solution to the problem known as Arizona: Let the state secede from the Union. And if Arizona refuses, then kick it out.

I for one am a bit tired of seeing cranky screeds by "Mick" about "holodomor" in the United States, which appear in every thread apropos of nothing.

As far as I am concerned this can only diminish the reputation of the blog and discourage participation by those who might mistake the comments as a reflection of the blog's standards and values.

Ignoring Mick does not seem to be working. My experience with Usenet has taught me that the one thing which scares away serious participants is spam and cranky, unregulated nonsense. I urge Mr. Talton to delete these messages and filter this user.

I don't agree with Mick on his analogy between our current mess and the Great Famine engineered by Stalin in Ukraine.

That said, he's entitled to his view. Many are feeling desperate.

I found a post on another blog by our old friend "Cisco Corrales" claiming, "I used to comment on Rogue Columnist, but am now 'banned' and not allowed to post because I questioned his motives and his 'facts'." This is not so. The only ones who have been blocked so far are those spammers selling discount Nikes or whatever.

I will block any trolls who try to repeat the personal attacks and other thuggery that happened (happens?) on AzCentral. Those are my standards. As far as more visceral commenters, let them be uplifted by the general sophisticated tone of the comments.

Well said, Jon. While I have sympathy with Emil at an emotional level, I share your generous, considered opinion. Thank you for giving voice to our better selves.

I'm certain that each of us, at one time or another during these troubled times, have questioned our own understanding of reality. While it may be disturbing to witness another's seemingly tenuous hold on the reality we share, doing so has value; for which we all should be grateful.

While considering your metaphor of a "road", it occurred to me that it is the rate of descent of that road that matters most. The term coined by David Holmgren, "energy descent", is what most informs and inspires my efforts to ease 'the slope ahead'.

I fear that Arizona, more than any other place, is pushing itself towards a canyon's cliff.

Mr. Talton wrote:

"The old housing boom is not coming back. This has major implications around America, but nowhere more than in Phoenix."

I would emend this to read "...not coming back anytime soon".

The general expectation among local economists is that Arizona's jobs and housing market will return to normal around the middle of the decade, with optimist Lee McPheeters saying 2014, and the state Commerce Department's director of economic analysis saying 2016 (though the latter was estimating when the state will catch up to pre-recessionary job market numbers and didn't specifically mention real estate).

A third economist, Scottsdale-based Jim Rounds, estimates that "We'll get to normal around the middle of the decade, and that includes employment, that includes retail activity and that includes economic conditions in single-family and commercial markets," though it should be noted here that Rounds works for Eliot Pollack & Company", a real-estate developer often referred to in the press simply as an "economist" as though he were a disinterested academic.


McPheeters is also an interesting case. The Arizona Republic article describes him as "an economist and director of the JPMorgan Chase Economic Outlook Center" but it seems he's an active financier also: at least, one "Lee McPheeters" was named as one of seven announced as acquiring a controlling public interest in First National Bank of Scottsdale, in a "public notice" in the Arizona Republic classifieds on July 23rd, 2010. I suppose there might be more than one Lee McPheeters here but it seems a remarkable coincidence.

My own view is that as long as the population is growing, land and housing cannot help being valuable and even increasing in value. Everyone needs a place to live, and those who buy cheap properties now will be able to sell high later provided they have the patience to hold on to properties until then.

Obviously it costs money to maintain those properties for years, which is one reason why they have been converted into rentals. That insures an income stream and tenants, and the latter help increase (or at least maintain) property values while discouraging vandalism and theft, in effect saving the owner the cost of private security.

Eventually, employment will recover, and with it incomes. As for high credit standards, everyone seems to forget that they have actually existed for years, but were simply relaxed (or not enforced at all). The motive was simple: the banksters love the benjamins and easy credit means mo' money.

I predict that with the passing of time and the recovery of the jobs market and the economy at large, credit standards will be relaxed again. Hopefully, not to the extent that they were, and with structural regulatory changes that make a repeat of the previous catastrophe less likely.

Incidentally, the housing crash provides an instructive example of how the economic elite (aka The Establishment) use even severe downturns to increase their wealth.

Families who paid mortgages for years only to have those houses seized by foreclosure, paid that money to creditors who now own the houses: so those creditors made out like bandits twice over, once when they received the mortgage payments, and again when they got the houses to sell AGAIN.

In fact, the elite are triply blessed, since many of the dispossessed now renting housing are in fact paying rent to the very same creditor class that dutifully collected the mortages of their previous homes, seized those homes, and are now renting them out to -- wait for it laddies -- former homeowners, who as renters are helping to sustain property values and property owners' incomes until such time as the market picks up and the housing can be sold at a profit. (To many of the old homeowners, who by then may have recovered their finances to the extent of being able to afford mortgage payments once again. Quadruply blessed!)

What a delicious irony to savor over half a bottle of French cabernet during a long and expensive lunch. (The productive members of society must keep up their stamina and are entitled to motivational compensation, lest they stop doing what they do so well.)

Even the stock market works the same way. Not, of course, for the ordinary individual investor trying to grow a retirement account, but for those with lots and lots of cash.

You see, while it's true that the big investors lost a great deal of equity, they didn't have all of their money invested in stocks, and they can afford to buy a great deal of additional stock at the bottom of the market and then sell it when the market recovers. So, even though they lose money in the short term, being able to buy institutional volumes of stocks low now and sell them high later, will actually increase their wealth over pre-recessionary values.

Emil, I think you're right to be skeptical of disinterested "analysts" like McPheeters and Pollack. What they're essentially peddling here is a best-case scenario for Arizona's economic recovery. One problem is obvious at the outset: housing prices are still historically high.
http://baselinescenario.com/2010/08/23/housing-in-ten-words/. Also, pessimists see prices falling even further. http://www.nytimes.com/2010/08/23/business/economy/23decline.html?src=me&ref=general

Another problem is the deterioration of Arizona's economy into production housing as the primary economic driver. For housing to return to "normal", there will need to be people with enough money to want to buy a house, probably earning that money at some wealth-producing activity. What might that be? Copper mining?

Talton calls the housing boom a Ponzi scheme because it had all the classic signs of investors artificially inflating a market in order to reap early gains. Otherwise, the economic fundamentals underwriting the boom were vague or altogether absent. Average incomes were stagnant. Arizona's huge in-migration was fueled by the boom itself. When the crash came, there was no cushion of a diversified economy breaking the fall. There was nothing but the puffery itself, the cotton candy of Real Estate Industrial Complex carnies.

Arizona has other problems that will darken like storm clouds on the horizon. 2010 will be the hottest year on record. I imagine 2020 will be significantly hotter. The current drought will likely become a baseline scenario for a drier future. And Arizona's underfunded infrastructure, both physical and educational, will exact a huge tax on any future recovery.

Talton's blog may be a bummer for optimists but it has the virtue of an author who predicted this entire debacle. When you survey the experts out there, you find one Cassandra and hundreds of Pollyannas. I'm not sure what if any credibility the latter group bring to the discussion but I know what they didn't bring when it really mattered. Clarity and honesty, for example.

Good points, Soleri. I'll get to some of them in a moment (mostly or entirely as an amen-chorus). First, there's something from that article that's been puzzling me. At one point it states:

"Arizona has lost 267,000 jobs since the recession began in December 2007..."

But later it states:

"Aruna Murthy, the Commerce Department's director of economic analysis, projected Thursday that Arizona won't catch up to its pre-recession job numbers until about 2016. She estimates the state will have a net gain of only 158,000 jobs over the decade from 2008 to 2018."


So, exactly how can the state catch up to its pre-recession job numbers by 2016 if by 2018 the state is still 109,000 jobs behind where it was just before the recession started?

This is not a rhetorical question. I intend to ask the article writer in email, but meanwhile, can anyone explain this?

Soleri, I don't think you have to be a pessimist to conclude that housing prices will decrease. There seems to be a general consensus on that. In fact, two recent articles appearing in USA Today contained information that, if added together, suggest the serious possibility of a double-dip recession:

Former Federal Reserve chairman Alan Greenspan said the slowing economic recovery in the U.S. feels like a "quasi-recession," and the economy might contract again if home prices decline. . . Asked if another economic contraction, a so-called double dip, was possible, Greenspan said, "It is possible if home prices go down. Home prices, as best we can judge, have really flattened out in the last year."

. . . "If home prices stay stable, then I think we will skirt the worst of the housing problem," Greenspan said. "But right under this current price level, mainly 5, 7 or 8% below, is a very large block of mortgages, which are underwater, so to speak, or could be underwater. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem." (syndicated from Bloomberg News)


The same issue of USA Today included a separate article which included this information:

[John] Burns [CEO of John Burns Real Estate Consulting, a national housing market analyst based in Irvine, Calif.] estimates that 6 million of the 8 million homeowners who are behind on their mortgages will lose their homes to lenders in the next two years. This "shadow inventory" could push ownership rates down to 61.7% [currently at 66.9%] within two years, he says. [Homeownership rates haven't been that low since they hit 61.9% in 1960.]

"Anybody who knows anything about housing thought it would be flat in the second quarter," says John Burns, CEO of John Burns Real Estate Consulting, a national housing market analyst based in Irvine, Calif. "Homeownership fell during the quarter when government was offering a tax credit (to first-time homebuyers). What do you think is going to happen now that there's no tax credit?"


Sorry, I somehow missed that term "net gain". So, obviously Aruna Murthy was predicting that by 2016 Arizona would have recovered its jobs losses and that from 2016 to 2018 it would gain another 158,000 jobs.

Assuming those are spread over a full 24 months, it would work out to monthly growth of roughly 6,600 jobs a month for the state, or 80,000 per year, which is down from the 125,000 per year peak in 2005 and 2006 (though one in five of those jobs was in construction).

Also see:


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