The $10 trillion is not lost, as it has been paid already to the former owners. What has happened now, as in the top of ths stock market in early 2000, is the last people into the ponzi scheme, paid off the lower tier. That’s what a ponzi scheme is.
With every home bought, there is a transfer of wealth, not a dissipation. So for every guy losing $200K on his foreclosure, is a Chris Johnston or a Schahrzad Berkland who earned $200K that is sitting in the bank. There is no money to replace; it already exists. A ponzi scheme doesn’t grow or lose money; it merely transfers it from the last people in, to the last people out.
Chris, if you really feel bad for these people, why don’t you go out and buy a house now, to reduce the unemployment of the construction worker? Better yet, let’s tell him what’s about to happen, so he can go back to school as an engineer. We need fewer construction workers, more engineers.
Also, if you feel bad, return the money you made off your house. That is part of the $10 trillion to be lost. You and I and the others who cashed out, have that money. To whom should we return it?
If the ponzi scheme continued, the next generation would pay 60% of income on housing, leaving nothing for new cars or the other industries that need support. How can car manufacturers have a chance if people are too broke to buy their cars? If housing is only 28% of income, people have enough money to invest and buy other durables and non-durables, creating a more diverse economy.
With the idea that housing prices should stay high, we are crowding out other products, as people just won’t have the money to buy them.
This housing bubble, like the tech stock bubble, is a ponzi scheme. Why would you want to preserve the ponzi scheme?
The millions who lose their jobs in this ponzi scheme will just transfer to more relevant fields in science, medicine, engineering. Some realtors on this forum are engineers already; they can go back to engineering, or selling engineering or biotech products instead of houses.
Building an oversupply of homes, making risky loans, and overseeing those transactions by realtors, inspectors, appraisers, title officers, escrow people (sorry, realtors, you are included here too), will find productive work in research, development, and sales of products which will bring the United States of America back to a global leadership position.
This great country will once again use its creativity, brains, its workers, its money to create, innovate, and build the products and services that increase productivity and quality of life, and increase return on capital.
I mean, what kind of return on capital does our country get for building homes that are 3x their true value, because of a bubble? Instead, let’s use that money to find alternative energy sources, since the end of cheap oil has arrived, and soon enough, the end of oil altogether will be here. Let’s make new biotech drugs to sell all over the world. Let’s increase Africa’s productivity as a farming nation, so they have enough money to buy the drugs we will produce. Let’s make the next generation of computers, pollution-reducing equipment, even better figher planes for your military buffs (although I could do without more military spending). But you get the idea: let’s be productive, to build our future, and start exporting again in a meaningful way.
Asset bubbles are the worst loss of capital and productivity that I can think of. Nothing is created. It’s a total ponzi scheme.
The money and workers that created this ponzi scheme need to be redeployed in a meaningful productive manner.
