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So I've long had the theory that the primary cause of economic malaise is high housing prices. It makes labor more expensive. It makes everything more expensive

• applfanboysbgon 4mo ago
  I'm not at all convinced that reasonable housing prices are a magic bullet for the economy. Housing in Japan is treated as a depreciating asset rather than an investment and is dirt cheap (outside of the most desirable parts of Tokyo, of course, but even then it's a pittance compared like-for-like with, say, desirable parts of NYC), and Japan's economic stagnation for decades is nonetheless well-known; it could be the dictionary illustration for "economic malaise". Of course, reasonable housing policy should still be pursued... just with basic human living standards being the justification rather than "it'll make our economy numbers go up" justification.
  • jmyeet 4mo ago
    Japan's economic malaise is a big topic that's mostly driven now by a rapidly aging population. Why is it aging? Low fertility rates [1]. So why are fertility rates so low? It kind of started with the housing bubble in the 1980s that created a youth unemployment crisis (ie hikikomori), which has now come to the West where we now have a youth unemployment crisis (and thus NEETs). I found this [2]: > Japan made the same discovery thirty years earlier. The hikikomori phenomenon (young men, predominantly, who withdraw from social life entirely, sometimes for decades) emerged in the 1990s, after Japan’s asset bubble burst and the lifetime employment compact dissolved. The cultural commentary at the time, both Japanese and Western, framed it as a peculiarly Japanese pathology, something about shame and conformity and the pressure-cooker school system. This was wrong. It was a structural response to the closure of the productive ladder, and it has now appeared in every developed economy that has reproduced the same structural conditions. It's worth noting that the US fertility rate is alos below replacement levels (~1.54) but the only thing that props up our population is immigration. Japan eschews immigration as a de facto ethnostate. South Korea is further along in that crisis. China will need to find a solution too. But there are cultural reasons here too. Japanese work culture, pay relative to work, etc. [1]: https://www.macrotrends.net/global-metrics/countries/jpn/japan/fertility-rate https://www.macrotrends.net/global-metrics/countries/jpn/jap... [2]: https://henryfudgeofficial.substack.com/p/degeneracy-is-a-symptom https://henryfudgeofficial.substack.com/p/degeneracy-is-a-sy...
    • applfanboysbgon 4mo ago
      [flagged]
      • jmyeet 4mo ago
        The unemployment rate doesn't capture the scope of the issue. That's true in the US and Europe too. It doesn't capture people who are undermployed, locked into lower-paid positions, have to juggle multiple casual/part-time jobs and end up doing "gig" work, which is often sub-minimum wage once you factor in depreciation. As for Japan, in particular, we have the Lost Decades [1], where the 1980s asset bubble collapsed and the economy stagnated for 20 years. Part of this was cultural too. For all of the faults of the US banking system at the time (eg the S&L crisis), the FDIC's approach is to take over failing banks whereas Japan let essentially bankrupt banks exist and gum up the economy. They are known as zombie banks [2]. You had zombie companies too and the entire thing largely came down to avoiding a loss of face by declaring bankruptcy, restructing or doing mass layoffs. For over a decade, you had the "employment ice age" [3], which essentially destroyed GenX at the time they'd otherwise be starting families. This continued into the 2010s with the millenial generation. Young people aren't stupid. They can look at their environment and increasingly realize they'll have no work-life balance, be lucky to find a good job, get paid enough to live on that job, won't own a house and can't afford to have a family. I call this a crisis in hopelessness. I also think this underpins how consumer spending has remained relatively strong. People are living for experiences rather than saving for a future because they have no future. [1]: https://en.wikipedia.org/wiki/Employment_Ice_Age https://en.wikipedia.org/wiki/Employment_Ice_Age [2]: https://en.wikipedia.org/wiki/Zombie_bank https://en.wikipedia.org/wiki/Zombie_bank [3]: https://en.wikipedia.org/wiki/Employment_Ice_Age https://en.wikipedia.org/wiki/Employment_Ice_Age
• win311fwg 4mo ago
  > Treating houses as investments actually kills the economy. Failure is always a possibility, but historically it hasn't killed the economy, it has rebalanced the economy; seeing businesses and people reduce their concentration in a specific area as they fan out into lower cost areas. Which is a rather useful function. This is why we're not all living in one giant heap somewhere in Africa.
  • jmyeet 4mo ago
    Where do you think the term "rent-seeking" comes from? To quote Adam Smith [1]: > “As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed and demand a rent even for its natural produce.” In the mid 1990s, the average house price in London was under 80k. It's now pushing 700k. Are salaries 9x? No. What is this other than stealing from the next generation? Raising house prices are nother more than a massive wealth transfer from the young and working to the old and wealthy. but here's the bigger problem. If you have essentially a guaranteed 9% return on a highly-leveraged asset with tax advantages and government guarantees, why would you invest in a factory or a business? That's the real reason manufacturing has hollowed out in the UK. I agree with Xi: houses are for living, not speculation [2]. We should absolutely punish rampant speculation by heavily taxing land hoarding. [1]: https://www.prosper.org.au/geoists-in-history/adam-smith-on-the-rentier/ https://www.prosper.org.au/geoists-in-history/adam-smith-on-... [2]: https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for_speculation https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for...
    • win311fwg 4mo ago
      > why would you invest in a factory or a business? Because you cannot afford to join the ranks of the investment class, so what else are you going to do with your time? You are quite right that you are not going to build your business in London, though. You are going to take your business to places where starting a new business makes sense. For the American audience, Detroit lived what you describe. What started as a vibrant manufacturing centre turned to property investment and soon it could no longer sustain itself. The people not benefiting from those investments there didn't throw in the towel, though. They packed their bags for what we now know as Silicon Valley and started new businesses developing the transistor. The economy wasn't killed, it moved. > We should absolutely punish rampant speculation by heavily taxing land hoarding. The law is to the will of the people, so this can happen on a whim, but you have to convince the people that piling everyone into a giant heap is desirable. Most people don't want to live in one giant heap. A Kowloon Walled City-esq world is a thing of nightmares for the population at large. Most people want people to move around, to make use of the entire world, not all settle in one place. These economic factors are the engine that pushes people to spread out.
• tharmas 4mo ago
  Excellent post! It's structural. A big problem is the Banks. They would rather lend for asset accumulation (rent seeking) than for production. In Canada, mortgage lending is literally zero risk as the banks are covered via CHMC against any defaults. Ultimately its the tax payer who is on the hook. Hence the massive housing-based economy. And none of the politicians ever fix the structure because many of them are property owners.