The Coming Crash

The US housing market is a gigantic Ponzi scheme that makes the late Bernie Madoff look like an amateur.  It’s way, way bigger than his measly billions, and it has an astronomically greater number of investors — around half of US households are involved with this scheme.  Though most of them invest in it not because they want to get a 40% annual rate of return on their investment portfolio, but because they and their families need somewhere to live.

Regardless of what any of the economists or pundits on TV tell you, the reality is that the price of houses has very, very little to do with the value of those houses or even the land they sit on, in any kind of objective sense.  The value of the houses and the land they are on is based on what people collectively accept is somehow real.  It’s based on all kinds of assumptions about the future being similar to or better than the present — house prices will continue to rise, which will increase the value of a homeowner’s home, and this will happen because people will continue to move to the city, because it’s on the west coast or the east coast or there are jobs here or there are allegedly good schools, lots of parks, etc.

In a democracy, theoretically we can control the costs, put caps on prices and that sort of thing.  In the absence of such practices, any astute grade school student can tell you that when as the population increases in a city or country, the cost of land and housing will tend to rise, as it is inevitably a finite resource, and not one that can easily be traded, like with goods or services.

Land is a different kind of thing altogether than other important economic factors like labor and capital.  The more people who then move to a city, whether to work there or to employ people in business enterprises of one kind or another, the more valuable the land there becomes — with or without the houses or other structures sitting on it (which are knocked down and replaced with more profitable ones more often than not).  The people and our activities make the land more valuable, and then we pay more and more for that land that we are making more valuable by our presence, by our creativity and our industriousness.

But what happens when the land and the houses on it under these and other kinds of unregulated market forces ultimately becomes so unaffordable that social order breaks down?

With the caveat once again that I’m not an economist, I’m pretty sure we on the west coast of the United States, among other places, are witnessing that right now.  Despite the number of vacant houses in the country far outnumbering the numbers of people living on the streets, and despite the fact that the streets of cities up and down the coast are lined with desperate people living in vehicles and tents, the prices of the houses continues to rise at a pace far, far faster than the rise in average income or spending power.

So then, the answer is no matter how untenable things get in terms of people living and dying beneath the bridges across the country, no matter how stagnant average income is for most people, whether or not a fourth of the children in the country are going to bed hungry most nights, the prices of houses will just continue to rise?

As long as it’s left up to the market, and as long as investing in the housing market is profitable enough to make it worth all of the security, police, prisons, etc., necessary to maintain high degrees of inequality in any society, and after all that, there’s still something left for people to enjoy about a city, then it would seem that the sky is the limit.  We can move further and further in the direction of the gated communities, bulletproof vests, armored cars, men with guns, and hey, Mexico City is still a really cool place, let me tell you.  Wonderful museums, and that subway system is just marvelous.  I’ve heard great things about Bogota, Lima, and Lagos as well.

Perhaps we ride it out and our cities start to resemble those places more, as the cost of housing continues to become ever more unrelated to anything having to do with the lives of the increasingly impoverished majority of the population.  Perhaps we just become more and more inured to the radical inequities we’re constantly surrounded by, and we develop stronger armor, both actual and emotional.  People do that all the time, all over the world.  We humans are said to be very resilient and adaptable.

And what about all that government spending that’s been going on, PPP and PUA and trillions more?  It seems to me we’re already seeing what about all that:  the investment bankers and billionaire landlord corporations see where to put their money, as usual:  in the housing market.  They can profit off of this, and of course they are, immensely, as is being covered daily on all the news outlets, who can’t ignore such rises in costs of this basic necessity of life for everyone that we’ve all been witnessing.  Skyrocketing for decades, now growing with some kind of impossible, exponential curve.

You can hear in the voices of some of the young reporters, as they try to maintain an objective air, that the numbers they’re talking about are almost incomprehensible to them.  How, they wonder, might they ever survive into adulthood?  But they dutifully report the news from the guy at the stock exchange who says there might at some point be a correction, but otherwise it’s always a good time to buy, because prices will always continue to rise, in the long run.

Maybe so, but then, what if the shit really hits the fan and the fault lines in society result in a total breakdown, like civil war of some kind?  What if everything catches fire, and we have to start all over again?

Well, then you get to meet the Disaster Capitalists.  Some of the most expensive cities you can rent an apartment in on planet Earth are Beirut, Lebanon, and, far more expensive, Luanda, Angola.  What do both countries have in common?  Decades of civil war is one thing, anyway.

It seems to me, unfortunately, that there’s still far more down a society like ours can sink, while life becomes ever more impossible.  And as the prices continues to rise and the economic and social stratification of society continues to deepen, it’s worth pointing out some examples of how success looks, and how failure looks.

Everyone knows that the very attractive and trendy cities of New York, Boston, Seattle, San Francisco, and increasingly, Portland, are very expensive to buy or rent housing in.  The received wisdom among the punditocracy is that the problem with these cities is there are too many liberals in power who limit growth of all kinds, and with more growth, more construction, etc., we can make things better.

But then when we look at the endless, sprawling, grow-forever cities like Houston, Dallas, Los Angeles, or Phoenix, you will find that renting an apartment there, while a lot less expensive than San Francisco or Seattle, is still more expensive than a comparable apartment in Rome, Berlin, Copenhagen, or Stockholm.  And this, of course, is to say nothing of making a comparison between renting a flat in Berlin as compared to, oh, New York.

I can already see the messages I’ll be getting from disgruntled Europeans who hate it when people like me talk about how much better everything is over there.  Before you write, you Europeans, do some research.  You think neoliberalism sucks?  Me, too.  And it’s way, way more advanced over here.  I hope you never find out how bad it can get, because it really, really does suck, you have no idea until you’ve seen it.

The fact is, although the incomes are higher, the cost of living is lower, in most European capitals, compared to major cities in the United States which are qualitatively less attractive to live in by most typical measurements.  People work fewer hours in Europe, but they make more money, and they have much, much more free time.  Governments invest a tiny fraction of what we pay in taxes for our military, but they spend about one hundred times as much as we do on the arts.

How do they achieve these wonders?  Through democratic institutions making laws that regulate the costs of the basic essentials humans need to survive, such as housing, medical care, childcare, education, food, and so on.  And through those democratic institutions using collective tax money to do things like build nice housing for everybody to live in.

So then what is the crash that’s coming, someone may be wondering.  Is it ever coming?  If prices can continue to rise no matter how much inequality does, and if prices can even continue to rise after a civil war wipes out half the country, as is the case in many places, what can possibly cause the crash?

The answer is us.  We can.  But it will require a whole lot of us abandoning the Ponzi scheme — whatever our current relationship with it may be — declaring housing a human right, and regulating the fuck out of this market, like they still do in most of Europe and many other parts of the world.

Of course, the vast majority of legislators in every state throughout the country is fairly deeply ensconced in the Ponzi scheme themselves, so it’s unlikely any initiatives towards regulating the housing market are going to come from them of their own accords.  They’re not working for the renters, or drowning-in-debt mortgage-holders.  They’re working for the people who pay to get them elected, in our winner-take-all, wildly corrupt, nominally democratic political system — the investment banks, landlord corporations, arms manufacturers, etc.

Complicating matters immensely, a huge strata of society that I like to call the Rich Peasants — the folks who own two or three rental properties or flip one or two houses every year and make a very good living at this sort of thing, benefiting from the unregulated market that benefits the big landlord corporations far more, while not particularly being the ones who created the mess in the first place.  For them, the system is working, and they will tend to be the ones promoting more construction as a solution, rather than regulation.

The municipal leaders in US political circles also tend to be from the Rich Peasant class (or above).  But even when they aren’t, and even when they support government regulation of the housing market in theory, their authority on these matters is largely superseded by rent control having been abolished at a statewide level decades ago.

The state-by-state deregulation of such laws beginning in earnest with the Reagan era of the 1980’s is when the soaring costs of housing also began in earnest, and the rise has only continued since then, as deregulation and more construction has also continued everywhere, the failed policies with their mouthpieces who sound more and more like broken records every day, mouthing increasingly irrelevant, incomprehensible words, speaking in numbers, like Pentacostals speak in tongues.  How can a one-story, two-bedroom house sell for a million dollars?  What does that even mean, when we know how much it costs to build such a structure?

So, we can’t expect much initiative from the legislators or from the petite bourgeoisie.  In fact, you probably shouldn’t trust the opinion of anyone who owns a house that they have finished paying off.  Be especially suspicious of anyone who owns several houses like that.  They probably ate the blue pills already.  If you’re a renter, you may still have a chance to take the red pill, and join us.

Who’s us?  I don’t know, I’m trying to sound revolutionary.  The point is, whoever us is, it’s unlikely to be the elected leaders or the “community leaders” as pictured on CNN.  Leftist intellectuals tend to predict everything wrong, and I’m sure I can join that club several times, but if this movement is to take place, it will be a grassroots movement that rejects the very existence of the most central pillar of American capitalism today — the housing market.

If a right is also to be a market, then that market must be shaped to fit the needs of the people, through government regulation of the free marketeers.  Or the market must be abolished altogether.  But for fuck’s sake, don’t let it be “free.”  We can see the misery that such “freedom” has wrought.  Give me regulation or give me death, not Patrick Henry’s fake liberty.  You can’t eat liberty, or happiness.  The word was originally supposed to be “property.”  The right to land, to housing, to self-sustenance — not to be someone’s servant.  But they took that out of the declaration.

The thing is, this isn’t a choice I’m making, this choice between regulation or death — it’s been made for me, and for all of us already.  Death is where this system is taking us — I mean literally, our life spans are getting shorter in the United States.  This isn’t happening everywhere, it’s a thing that’s specific to certain capitalist shitholes and war zones.

Regulation or death is how it is, it’s not how I’d like it to be, necessarily.  Socialism or barbarism may be a slogan, but it’s also just a basic observation of reality.  These are, it seems abundantly evident, our options.

Portland, Oregon, which, as my readers are hopefully not too tired of hearing, is the most rent-burdened city in the United States (average income as compared to average rent is the formula for “rent burden”).  We are governed by a classic collection of liberal landlords overall, both in the state capital and in City Hall.  (There are some wonderful exceptions to this rule, but they’re never the majority.)  Recognizing there is a crisis, especially because the people with the money complain about the tents in front of their expensive office buildings all the time, the landlord liberals make the most obviously, laughably inadequate proposals for addressing this landscape of open wounds which can be seen in every direction.

The mayor recently unveiled a new tiny home village that will house 19 people, that includes a shower and a toilet.  Meanwhile, there are thousands of vacant houses and hotel rooms and thousands of people living on the streets, but the local news reports the opening of the tiny home village with enthusiasm, as directed to do by the corporation that owns the TV station, who also owns half of the property downtown.

One of the members of the City Council has a brother who is living on the streets and suffering from mental health and drug problems, and it does seem like Dan Ryan has genuine sympathy for people in such situations.  But if he realizes there is a massive economic dimension to the problem, and that really addressing the problem is going to put anyone trying to do in direct conflict with the moneyed interests of society who are most actively involved with promoting and profiting from the Ponzi scheme, he gives no indication of this.  In fact, all indications are that he admires the Ponzi scheme, and knows that the people who got him elected want the housing prices to keep rising.  When asked by reporters if Portland is on its way down, with all the riot declarations and boarded-up windows, Commissioner Ryan says things are going to be getting better, by which he means, more profitable for the owners of the buildings, and more expensive for the rest of us.  He just doesn’t say it quite like that.

In some cases with these politicians, they may not be corrupt, they may just lack vision.  The changes that need to happen are indeed very, very big ones.  Unregulated — or very insufficiently regulated — capitalism is destroying the planet, of course.  The environmental impact is well-known at this point.  But it’s also wreaking terrible destruction on societies around the world, such as this one, most radically evident when it comes to the mushrooming cost of housing.

The kinds of regulation and policies the leaders of global capitalism in places like the US, Europe, and China are starting to enact in order to try to at least slow down the pace of climate change are the kinds of reforms that are desperately needed not just for the environment, but for the suffering humans in it as well.  Specifically, if the unregulated market is allowed to continue to control where people can afford to buy or rent a house, this will guarantee more sprawl, more fires, more floods, longer commutes, more pollution, more misery for so many, and it will make any real solution to climate change impossible, as the ends involved are completely incompatible.

You either control sprawl through regulation, or you destroy the climate through sprawl.  You can’t have both an unregulated housing market and intelligent policies to save the Earth and prevent the untold suffering climate chaos will continue to unleash.  Controlling sprawl in each individual city is an essential part of the process here, for the environment, even if we don’t care about rent-burdened renters, underwater mortgagers, or tent-dwellers.

But the new 19-bed tiny home village that the mayor recently christened, or the officially-sanctioned tent encampments with hygiene stations provided by the city that Commissioner Ryan has been talking about, are like tiny drops in a very large and rapidly growing bucket that has holes in the bottom of it.  We need a whole new bucket.


David Rovics is a frequently-touring singer/songwriter and political pundit based out of Portland, Oregon.  His website is