....But they will, SOON!

 The housing "crisis" demonstrates the flexibility of the American economic engine and its willingness to milk a trend till its dry as a bone.  But to me, the housing bubble demonstrates a disturbing trend in American culture.  For the sake of argument, let's start with a couple of postulates....

1: The Housing industry requires home-owners to regularly inject money into their homes

2: For home-owners to inject money into their homes, the home-owners need jobs

3: Home-owners in America live on fixed, finite incomes

4: Whatever home-owners are spending on their homes, they are NOT spending elsewhere....

Argue any one of these statements on your own- I accept them as truisms, and have never heard any arguments that convince me otherwise.  These 4 postulates tell me that, no matter how hot the market, no matter how hyped the housing development, no matter how fast the turn-over of housing in America, the Housing market is only as solvent as the rest of the economy....

....Which right now is crap, THANKS to the housing market.  I believe that the Housing bubble stems from the dissolving of the Dot-Com bubble, whose demise drove investors flock to whatever other market seemed hot, which at the time was housing.  I'm not convinced of that origin, but doubtless, starting in about 1999 housing prices started rising at STUPID rates, and you can hardly blame investors for wanting to jump on-board.

I don't give a hoot about high-risk loans to shady borrowers or unethical practices on the parts of shifty banks.  I don't care about grift-life business models making margins off of trading mortgages, a couldn't give a rat's hienie about artificial hype for developer's faulty housing schemes, all of which have made a lot of headlines lately.  People keep looking for scapegoats, and all these goofy practices on the various players' parts make easy targets.

Forget all that.  To me, all that matters is that, in America, everyone needs housing, and whatever people spend on housing, they DON'T SPEND ELSEWHERE.  If we make a market where people spend 35%, 40%, 50% of their incomes on their homes (more than that here in New York City), that means that they AREN'T spending on their businesses, on their savings, on buying American made goods (or, as is more often the case, Chinese made goods), on education....

That means that they aren't spending enough on food!

Unless productivity is way up in America, there cannot be a booming housing market.  That's that.  Try to make a counter argument, I dare you.  I would take it a step further and say that, if productivity is up, and people spend more on their homes, then you get inflation, but that's a different, longer argument. 

I've heard arguments of positives outcomes from the housing bubble, like the rejuvenation of old housing stock (which is good), and the accumulated value of middle-income families' homes (which is a dangerous assumption).  But these, to me, are micro-climates, and rooted in the foolish assumption that people can just pump money into their houses forever.

If we have no manufacturing economy, if as a culture we don't MAKE anything, then we are not entitled to our housing bubble.  This is not me speaking from hind-sight.  I figured this one out back in 2001.  Ticks me off, because SINCE then I became an American manufacturer, and now fewer people can afford our tasty snacks because everybody's busy paying off their userous loans!

-a ticked off Peeled Skinny, who thinks you should spend less on housing and more on ANYTHING else....