Newly constructed home in Victorville, CA north of Los Angeles being demolished by the Guaranty Bank of Irvine. From the news story:
A Guaranty Bank official, Real Estate Officer Dean Smith .. said it was a choice of pumping their own money into property site improvements and additional money to bring the home up to code or tear down the 16 homes ..
Our only option is to either proceed with putting more than a million bucks into the land, which we’ve already taken a huge hit on and lost a lot of money, or, we tear down the houses, Smith said.
{ 29 comments }
The state causes waste on such a vast scale, it’s enough to make a person weep.
A commenter in the YouTube thread says:
Later, the same commenter quotes verses from the Bible and (apparently) the Koran against “usury.” This is the level of intellect that is permitted to have a say in public policy. This is democracy, laid out bare for all to see.
wouldn’t destroying homes help the housing market? the banks can take the hit on their defaulted assets and then prices on houses can hit bottom sooner since they are taking excess inventory off of the market. what is causing the problem in the market is no regulation, they should have regulated the amount of homes they built based on the real demand that is out there, and im not talking about demand for pizza delivery guys looking for 300k homes.
……sounds like he has read keynes……
But the extra business for the crane operator means a boom for the economy *ducks*
The best “regulation” of demand is consumption according to productivity, i.e. effective demand, i.e. the market’s law. Credit expansion violates this law, or attempts to. So yeah, someone should “regulate” demand – the artificially stimulated demand by the government. Regulate the government, please. It’s like a big child that cannot control its high TP.
Leave Keynes alone! You just dont understand how much stimuli it will create when they rebuild that house.
We nee jobs…
For RWW
Your assessment of the “public intellect” aka “convential wisdom” points to the real problem.
Virtually unsolvable. Unfortunately, in our lifetimes, the Mises Institute will never lack cause.
For RWW
Your assessment of the “public intellect” aka “convential wisdom” points to the real problem.
Virtually unsolvable. Unfortunately, in our lifetimes, the Mises Institute will never lack cause.
The video shows partially-built homes. Those things can’t just be left sitting for years. Given the drop in house prices, the builder/ bank is faced with tearing down and losing $1 million, or finishing and losing $2 million.
I’m surprised that nothing is mentioned about the real villain: The building department, building codes, and the miles and miles of red tape that home builders face.
i think we’re missing a real chance here for the government to help. They should buy these assets from the bank, then finish them (employ carpenters), decorate them (employ furniture manufacturers, interior designers etc.), landscape them (employ landscapers etc.). they should then sell them back and forth between various government agencies (realtors fee anyone?), THEN they should destroy them (employ demoltion experts). We could keep a couple hundred people in continual employment just in this one subdivision……………
“Leave Keynes alone! You just dont understand how much stimuli it will create when they rebuild that house.”
And then tear it down again…
Roger Garrison had a lecture years ago, with Powerpoint, that I was reminded of when I saw this. It was about Ivan and the brick yard. Maybe someone can link it.
Mr Obama “TEAR DOWN THESE HOMES”
The video and some of the comments posted on the video are depressing on many levels.
The video narrator’s money quote, (I’m paraphrasing) the bank was being FINED daily by the city of Victorville for the incomplete homes.
That says it all. Only a gov’t can be so stupid. If instead of the city placing daily fines on the bank, the city left the bank alone, the bank would be able to salvage their losses by selling the unfinished homes for whatever they can get for them, someone else could finish them, having purchased them at a reduced to market price and potentially make a profit on the ultimate sale. The city would then benefit as higher value property was added to the property tax rolls.
Who knows, the bank may have had to sell at $1, but $1 sale is better than having to pay $1,000,000 for demo costs.
Hey at least the destruction will create jobs, right? Oh, wait, no one here will fall for that.
The guy in the vids seemed astounded that the banks won’t use their bailout $$$ to complete the homes, yet he doesn’t even ask who would buy a large and expensive house in the middle of a desert which is a 2h 40m commute away from Los Angeles (each direction at rush hour according to G**gle).
Inflation makes people blind.
“The state causes waste on such a vast scale, it’s enough to make a person weep.”
Does anyone know of any research on this topic? Quantifying the waste, that is.
My guess is that 30-40% of wealth created is destroyed/wasted, and a further 25-40% is bubble activity that would never exist without the state (eg. tax lawyers). It almost seems like without a state everyone would instantly be at least twice as well off, and within a few decades there could easily be no poverty anywhere on earth. Sigh.
Mike Sproul said
“I’m surprised that nothing is mentioned about the real villain: The building department, building codes, and the miles and miles of red tape that home builders face.”
Yeah, those building codes and inspectors can be a real pain in the a$$. Its my land, I should be able to put up whatever I want.
So what if its a rat-infested tar-paper shack beside your nice house. Its my right !
So what if the wiring will burst into flames for the next one or two owners down the line.
Don’t worry – a natural gas leak in my house will rarely level your house.
I’m glad I’m not living next to you…
Actually, it’s not my land. Part of it belongs to every busybody who wants to make sure that I recycle half of my construction debris, that I use 1.6 gallon toilets, that I use more insulation than fuel economy justifies, that I install fire sprinklers whether I want them or not, that my exterior door strikes have 3.5 inch screws, that I pay $400 for an ‘energy design’, etc.
Good thing we have wise and munificent government officials keeping me and my tar-paper shacks at bay. Lord knows people would never be able to build proper houses on their own.
@HM:
All of the problems you mentioned that YOU or your property would face with possible vermin infestation or gas leakages are dealt with through property rights.
The Bank or whoever is the owner of the property is the one liable and thus responsible to pay restitution to you if they inflict harm on you and your property.
I have to admit, I was a little disappointed by this post. When I saw the headline I became excited thinking it was actually a video explaining ABCT that I could post elsewhere and distribute among friends. But no. MISES FAIL.
@Menckenite
You can find that lecture here:
http://www.auburn.edu/~garriro/lvmi.htm
Barbarossa and others:
The phenomenon captured in that video perfectly demonstrates ABCT in action, though without explanation. A brief explanation would be something like: Artificially low (i.e., government-determined) interest rates stimulate more investment in longer-term industrial projects, such as the building of cars, homes, and factories, than a free market would allow. This is because investors and capitalists perceive the costs of these endeavors to be lower than they really are, or, in other words, they anticipate their rate of return on their investment to be positive since there is such a low interest rate on the loans. However, in reality, the consumer demand and the resources in the economy (basically, saved money) that would, in a free market, be indicated by lower interest rates really don’t exist; the interest rate really shouldn’t be that low; the wealth to pay for the fruits of their long-term and expensive investment doesn’t really exist, it just looked like it did because of the deflated interest rate. Therefore, after a few years some companies come to realize that the long-term project they started really won’t be profitable, so they have to abandon it in the middle of production.
The other way in which long-term capital projects can be shown to be a bad investment is, after they are already produced and on the market, their price is much lower than the capitalists and investors anticipated. This is what happened with homes that are already finished.
It’s good to see someone avoiding the ‘sunk costs’ fallacy. I look forward to the day when all these bubble companies collapse (I mean, the ones that haven’t already) and seeing what takes its place.
Misesian
@HM: wrote,
“All of the problems you mentioned that YOU or your property would face with possible vermin infestation or gas leakages are dealt with through property rights.
The Bank or whoever is the owner of the property is the one liable and thus responsible to pay restitution to you if they inflict harm on you and your property.”
Mise who do I call? We had a gas leak from the street, damaged five properties, It was possibly there for years.
I smelled nothing, but I was tired and son sick (asthma, fainting), yards (trees and the likes) dying, worms and gnats. The neighbors called for years, the gas co said it was nothing, for it was coming from the street. My yard, 4 days after this leak was fixed, tested positive for gas. Bad couplings from 1970′s ill fitting plastic to metel. Most of the city is old 1950 bungelos (mine) sprinkled with newer homes (my neighbors).
This is the third leak within a mile, in four years. One leak, in the street also, did catch on fire it had to be foamed by the fire department!
City not helping, is it just me against the conglomerate gas co and their lawyers?
What are my property rights? Why do I pay property taxes to the city?
To boot the city with bailout money (8 million) has sent notices to 30k within my city to let homeowner know what gas and electric consumption is in regard to their neighbors.
I contacted my Congreewomen, In regard to the gas leak and the “green” notices. It has taken me a while to wrap my brain around it all. This just can not be right.
Is gasleakmom another pseudonym of HM? Now you’re complaining about the current status quo created by government. Utilities usually have monopolies granted by the local government. Property rights entail being able to protect them, but government protection of those rights can be less than zealous (should be no surprise, considering how many ways government tends to violate those rights). Government monopolies, already protected from competition, tend to be less responsive than they would be in a free market.
For a practical answer to your question, see if there is a state organization that is supposed to be “regulating” utilities in your state. In my state, we have a Corporation Commission that does that kind of thing. This organization would be the “appropriate” one to complain to.
For a more theoretical answer, maybe you should take a closer look at the nature of government and how it actually works, and see how that differs from what we generally advocate here on this site.
gasleakmom,
You said the magic words, “The neighbors called for years, the gas co said it was nothing, for it was coming from the street.”
The street is someone’s property, the City’s. They don’t want to fix it. Hmmmm. Sounds like the gov’t is once again the problem. I do hope for your sake and your neighbors that the gas leak situation can be fixed. But you see, this wasn’t a building code, bad neighbor problem. This is a “gov’t could really care less about you” problem. Gov’t wants your votes to stay in power and ultimately just wants your tax money.
Its devastating the memories behind that house….
Comments on this entry are closed.