The next bubble

[Wild Style]

home prices and wage inflation are directly related, so I agree with you on that.

[GregW]

I expect the internationalist 'Free Trade" mavens will continue to erode US manufacturing and manufacturing wages. I also expect foreign competition to erode white-collar wages as well. Without higher wages the wage earning workforce which is still most of our population will not be able to purchase most of the goods and services already too expensive. The housing market is the primary example. As several have pointed out a $450,000 house requires a $150,000 job to support the financing. I do not see enough high paying jobs becoming available.

The result is likely to be a considerable deflation of the prices of the higher end of existing market. By that I mean the $300 to $600k houses will drop to $150 to $200k before they can be sold. With literally millions of houses in this situation the construction of new unaffordable houses will just about stop. Construction of “affordable” houses will also be restricted by the sale of previously under $200 k houses. The financial effect of this loss of value will be interesting but not plesant.

I do not think that the “alternate energy’ market will be large enough to actually start and/or sustain a bubble because there is just not enough money involved. As an extreme case a person could spend as much as $50k fitting a new heating system and super insulation on their house. This is several hundreds thousand less than buying a new ‘”green” house.

The one aspect of the “alternate energy” market that might offer a place for investment but is not likely to create a bubble is the nuclear power plant construction and operation business. These require huge amounts of capital but are not likely to be ‘flipped” for speculative profit.

Another place needing huge investment is in the railroad transport system. The expected expansion of rail freight capacity may just not happen id eh consumer aspects of the economy collapse along with the remains of the housing market. There is not likely to be enough disposable income available to support the existing level of consumer spending let alone an increase.

Overall I do not expect there is enough real wealth available to support the existing bubble in housing, commodities and equities to even start, let alone, support another bubble.

I am glad that I did not participate in either the dotcom or the housing speculations of the last couple of decades. What little I have has remained intact and I hope it will continue to do so. Good luck to us all.

[Wild Style]

Greg

as usual, great post.

I think with alternative energy I think you will be able to tack on infrastructure to that as well. I think govt (federal and local) will work with private sector with financing from wallstreet to build out mass transit and bring roads, bridges and tunnels in to good repair. So infrastructure + renewable energy = new bubble (doesn't have to be a bubble but silly speculators will make it so, well them and govt deregulation)

[GregW]

Our infrastructure is indeed falling apart. Sometimes I think rust is a paint color on interstate bridges. We will be able to afford the repairs and employ people doing them if we realize that we cannot also afford an overseas empire and the associated vastly inflated military spending.

[bhcompy]

the military spending is very little overall.. what is it? 5% of the GDP? how about not being able to afford pork in every bill congress puts through? the president needs redline veto power to cut that crap so he doesnt get crucified for vetoing bills that are useful without the pork