Low interest rates lead to overbuilding leads to demolition

Submitted by Edward Harrison of the site Credit Writedowns.

The chain of events whereby easy money leads to malinvestment that impoverishes a society is now fully manifest in the United States. You remember Victorville, CA where new homes were being demolished because it cost more to maintain them than to demolish them? (see post here) Well, that same phenomenon is going to be at work all across the USA because we have just witnessed one of the greatest episodes of malinvestment in the history of the world.

An article over at the Telegraph discussing this possibility has really grabbed people’s attention (137 diggs, 66 delicious bookmarks, 474 comments at last count) and seems to be everywhere. Here is a snippet.

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.

Most are former industrial cities in the “rust belt” of America’s Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside.

Now, Mish has a post over on his blog which reminds us that the median home price in Detroit is now $6,000. Obviously what is happening in Flint right now is coming to Detroit very soon. But, I also want to remind you of the Victorville incident and exurb overbuilding – it is not just cities. No one wants that housing stock. According to Google Maps, it takes 2 hours and 40 minutes to commute 81 miles from Victorville to LA in traffic. That’s not something many people are willing to do. And if you look on a map, you will notice that Victorville, far inland, doesn’t have many other huge cities near by either (Barstow is 34 miles away and has great outlets for those of you who like shopping).

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Translation: Much of the building in Victorville was malinvestment. This is why houses are being demolished there. You should ask yourself how did we get to a place where entire cities are shrinking via demolition (Flint), where other cities have a median home price of $6,000 (Detroit), and where other previously sleepy towns are also shrinking via demolition (Victorville). Why is the U.S. so shattered financially that we must resort to demolition houses in order to move forward? The answer, of course, is easy money.

  1. Because of the rise of deregulation, a shadow banking system forms in the United States and globally. Long-Term Capital Management, famously leveraged 100-to-1, the most famous part of the shadow banking system fails spectacularly and is bailed out.
  2. The bust frightens the Fed under Alan Greenspan, which pumps liquidity into the market due to this event and the later Y2K scare.
  3. We get a massive bubble in shares, especially technology and telecom stocks.
  4. The bust frightens the Fed under Alan Greenspan, which, fearing deflation lowers interest rates to 1%.
  5. A massive housing bubble expands with huge overbuilding of the U.S. housing stock
  6. The bust frightens the Fed under Ben Bernanke, which, fearing deflation lowers interest rates to 0% and engages in both quantitative and qualitative easing.

Do you see something wrong with this picture?


US cities may have to be bulldozed in order to survive – Telegraph

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward http://www.creditwritedowns.com


  1. wintermute

    Excellent post. Further to the distortion of markets leading to malinvestments – this also contributes to climate change.

    The carbon-footprint of a new-build house is large. Destruction of new-build houses is environmentally wasteful (even if the site is returned to green land).
    Our CO2 levels are approaching 3 million-year highs – http://www.physorg.com/news146755017.html

    Kyoto is pointless if market distortions continue to cause excessive carbon emissions – in all countries.

  2. Jim

    Very interesting post. How is it that the richest cities in the United States seventy five years ago are now the poorest? There is plenty of blame to go around, but its clear that somebody in government didn't think ahead. Do you think tax policy had anything to do with the decline of Flint and Detroit?

  3. In Debt We Trust

    Great post. I lived in upstate NY for 7 years and the demolition idea is one that is periodically resurrectd by politicians. Ideas run the gamut from gentrification (what?) to building farms (much better), wind farms (w. ny is very windy), and casinos (bad idea).

  4. renholderm

    It's because they were tied to industries that were extremely lucrative, but aren't competitive anymore: auto, steel, shipping(principally due to cost of labor). Though certainly in the case of Auto, mismanagement. I don't think tax policy has anything to do with it, unless you mean the policy of giving tax breaks to these industries.

  5. Edward Harrison

    And, by the way, I realize I'm conflating two subjects: Flint and Detroit vs. Victorville. But, my real concern here was more Victorville and less Flint. However, the more Victorvilles there became, the worse it was for Flint, Detroit and similar locales.

  6. art-eclectic

    To be fair, no one commutes into Los Angeles from Victorville. They commute into San Bernardino, Redlands, Corona and other Inland Empire cities. Victorville was where you went for cheaper new construction as the 15 South corridor going through Corona & Lake Elsinore were pricier homes.

    The people who were commuting into Los Angeles went for Palmdale/Lancaster — commute not as bad, but you are still talking high desert and cities with limited jobs in the local area.

  7. jest

    people do commute to Victorville. I knew someone who did it for about a year. some people commute to LA from Vegas, believe it or not.

  8. Mara

    There's something wrong at many levels. I'm search Helicopter Ben is praying for the revelation that will allow him to have real negative interest rates without being lynched. Considering the TARP giveaway, maybe's he's already got that in the bag. Pyrrhic victories over deflation…

    At a social/humanitarian level, this is an abomination to destroy new homes. Instead of actually providing for the homeless, single-parent or struggling families, we (as an economy and society) would apparently prefer to make sure to shore up prices and squeeze every last drop of blood from the poor and the now endangered middle-class. Though these are ex-urbs, there is still some more local employment, viable if the cost of the housing were low. Wasting the infrastructure, is well, a waste.

    Catherine Fitts at solari.com discusses some towns that had high foreclosures and actually repurchased properties and benefitted from keeping properties occupied and maintained. The bulldozer might be argued in truly crumbing and dangerous cases, but it is not a good long term solution.

  9. "DoctoRx"

    Ed: Note typo in the title of the post ("lead" should either be "leads" or "led", I think. Also, near the end, "demolition" (above list) prob should be "demolishing".

    Agree w Mara re the social costs of knocking down nice new homes.

    1. Soviet malinvestment was worse.
    Not a lot of the new homes are going to get knocked down; just the price will get knocked down.
    2. US malinvestment went far beyond homes.

  10. NOTaREALmerica

    Something tell me this won't be the last bubble then. If 2% caused dot-com, and 1% caused housing, then 0% will cause another. The real problem is what come after 0. We have lift-off, I guess…

  11. VG Chicago

    Sorry, Ed, but to focus on the isolated cases of Victorville and Flint and then somehow extrapolate that to an entire country the size of the United States is not only misguided, but to me it also seems rather foolish. I suggest you visit Chicago, where construction continues, and the doomsday scenarios you have so foolishly suggested have not occurred, nor do they appear imminent.

    Furthermore, I don’t see you discussing very often similar troubles occurring in other nations. Case in point: Spain, where unemployment is currently over 18 percent, and thousands of construction projects across Spain have been abandoned, turning the place into a major eyesore. Should we then predict that just because the construction boom ran its course in Southern Europe, Spain is about to revert back to its former, not-so-long-ago status of Third World and poorest nation in Europe?

    This is a lame contribution you have made today, Ed. But it’s Saturday, so I’ll overlook it … this time :)

    Vinny GOLD

  12. Edward Harrison

    Docto Rx, no typo: that is as I wanted it (rates lead, overbuilding leads). I also got an interesting comment about the lack of intrinsic demand for people to live in the desert.

    The reader said: "They were talking about water problems with 5k people" and now Victorville has 85K.

    For me, the fact that people were building and prices were shooting up so much in the inland empire is the Southern California equivalent of the Stockton housing frenzy which I also plan to highlight. There is not a legitimate connection between Barstow/Victorville and Riverside/LA just as there is none for Oakland/SF and Stockton/Modesto. However, during the bubble there was.

    Michael Robinson of the BBC has a very good documentary in two parts chronicling how Stockton prices increased as a direct result of increases in the Bay area.

    Real estate IS local but we saw clear leakage during the bubble that is going to crush the likes of Modesto and Stockton for years to come.

    Vallejo is one exurb that is already bankrupt. More will follow.

  13. VG Chicago

    Edward Harrison: I am civil. But I admit, perhaps a bit too ironic sometimes… Yet, the ":)" was at the end of my post…

    Mara: I don't think turning new homes over to the homeless is a good idea. Local governments need to collect property taxes, and I don't see how the homeless can come up with that. What would be a better idea is (and you read it here first) to arrange for an even exchange of new house-for-old-house for individuals living in older homes. Then the cities can demolish the older houses.

    But don't get me wrong about the plight of the homeless. As a doctor, I used to work with homeless, and I assure you that the vast majority have issues far greater than homelessness itself, such as chronic substance abuse and/or severe mental illness. These people need treatment and assisted living environments, not free new suburban homes.


  14. bob

    "to arrange for an even exchange of new house-for-old-house for individuals living in older homes."

    Around most cities the newer homes are further out, and require a lot more overhead to sustain. The term sprawl comes to mind. Moving people further out does not make sense.

    It always cheaper for the guy building houses to start with raw land, and not have to demolish anything existing.

    The cost savings come from getting the municipalities and existing taxpayers to pay to bring in new infrastructure.

    It always cheaper for the developers to start from scracth, and then get the hell out of town before the real costs are known.

    I heard the head of a large university say it 10 years ago, "we stopped building buildings to put people in 50 years ago, now we just build to put peoples' names on them.

    The cost of maintaining a house adds up to more than the house over a pretty short period, its the same with infrastructure, and factors worse with spread out infrastructure.

  15. Kevin Kleen rpakkleen@gmail.com

    I'm not a fan of exurbs either, but there are a couple of aspects of this post which I think are wrong. The first inaccuracy is that the homes in Victorville were demolished because it cost to much to maintain them. That's not correct – the issue was the homes were built before the roads and other infrastructure were completed. Had the homes been completed, they could have been sold, even in Victorville (see link below for the whole story).

    I also think it's incorrect to directly link low interest rates with overbuilding. Properly underwritten mortgages at low interest rates don't lead to overbuilding. The overbuilding was a response to demand from borrowers who could access the market only through mortgages they couldn't hope to repay. Although low interest rates facilitated low teaser rates, the real problems were the loan structure itself and poor underwriting.


  16. Edward Harrison


    My story is accurate. The word 'maintain means 'keep." as in keep money tied up in the financing of the project.


    This is similar to the decision builders in Miami will face regarding half-built condo complexes. At some point, they must invest more and finish the project or tear it down.

    There are (levies, fines and) taxes associated with having (half-finished)dwellings on property that do not exist if the property is bare.

    As for low rates of interest,its obvious that the lower the interest rate, the less interest must be paid for any individual loan. This makes houses more affordable and ends up driving up prices.

    Equally, when rates were low in the late 1990s, investing in heavy telecom infrastructure projects became viable in a way that also led to overbuilding.

  17. STS

    Interesting post, but I think blaming it all on easy money is confusing a symptom with the cause. The real cause of the 'problem' is globalization. After WWII, we had just destroyed the industrial infrastructure of much of the developed world. We had a near monopoly on the 'commanding heights' of the economy and began earning rents on that infrastructure.

    Gradually we lost our edge, but our ruling class never lost the arrogant sense of entitlement which came from this heady 'world leadership' gig. Gradually, of course, we lost industrial leadership, but our elite just sent their kids to MBA-granting finishing schools and they continued to focus on the easy money to be made from global labor arbitrage. The Fed has used low interest rates as an adrenaline hit to try to keep our economy growing despite the steady drain of meaningful economic activity to Asia.

    In recent years, our leadership class has done more for the welfare of the coastal Chinese than for the average American citizen. That's not altogether a bad thing from a global perspective, but obviously not fun for the average American whose standard of living has stagnated for many years and will likely decline substantially in the next decade.

  18. jerrydenim

    Ed, good post, but I think your analysis falls a little short. Yes you're absolutely right that the cheap easy money policy of the Fed is very much to blame and yes again it is hare-brained to attempt to reflate the same tired old bubble with more of the same bad policies, but Flint, Victorville and Memphis are three completely different stories. Flint is a clear cut case of de-industrialization, Victorville is the fault of easy money and all of the other nefarious practices of the housing boom (securitization, appraisal fraud, mania, etc.)Memphis has many causes of malaise but as a former resident I would place most of the blame on "white flight". It's a bit un-PC as a topic but Memphis is a poster child for the phenomena. if you dig deeper into the "white-flight" that struck Memphis post desegregation you get to the real root of the problem with American cities; you'll notice the desegregation of Memphis's public schools occurred almost simultaneously with other societal trends that made the "flight" of affluent whites out of Memphis and many other city limits possible- 1.) The popularization of the automobile among the middle class, 2.) Eisenhower's highways and the suburban sprawl lifestyle that sprung up in the wake of the car and the amazing new US highway system.

    The problem with blighted neighborhoods is an overabundance but its also the product of decades of terrible urban planning and zoning. Flint, Victorville, Memphis and every other urban area with terrible commutes and abandoned strip malls is the victim of bad planning and stupid lifestyle choices. We discard old malls and neighborhood's like yesterday's fashions or a Big mac wrapper tossed out the window of our big stupid gas guzzling cars. For years the answer to blight was build a newer fancier mall, build a newer fancier housing development and build another beltway around it all to link it to the grid. Tearing down the peripheral blighted suburban sprawl surrounding a denser core of a more centralized urban area is no different than the "green belt" Portland Oregon established around itself, except the policy is far more costly when implemented retroactively. It kills so many birds with just one stone. Its sad its come to this, but American cities were designed very poorly from the start. The way I see it we probably never had a chance since our adolescent nation came of age while we were infatuated with disposable consumerism and the gasoline powered automobile. The needed adjustments are going to be painful but necessary. Goodbye Detroit, goodbye Detroit lifestyle.

  19. Robert Carruthers

    It was madness during the great depression for the government to kill a million pigs to maintain prices while people went hungry. It will be just as stupid if it bulldozes houses to maintain prices while people are homeless or sleeping in tent cities.

    Individual property owners weighing up the costs and benefits of demolishing their own buildings is one thing. Governments mandating the destruction of suburbs to maintain the prices of other suburbs is quite another.

    Let the market do its work and prices will reach an equilibrium at a point people can afford.

  20. William Mitchell

    Housing and pigs don't equate, because abandoned neighborhoods have bigger externalities, mainly crime. Costs money to police them, but if you don't, they turn into crack houses.

    That said, let's not bulldoze 20 cities on the credible, but mostly untested, assertion that it will rescue city centers.

    So much jumping to conclusions in city planning. E.g., still not clear whether Portland's successful downtown results from the greenbelt or from the historical accident of small city blocks.

  21. William Mitchell

    Victorville's problems are bigger than the commute.

    To help East Coast readers appreciate the scale of malinvestment: Victorville is in the Mojave Desert. Picture Las Vegas, but hotter and smoggier, and without casinos or reliable water supply.

    The area is separated from LA by a rugged 6000-foot mountain range (green area on the map), with only a couple of roads through, and little prospect of improvement.

    The area is not without experience in property busts. Neighboring cities Palmdale and Lancaster suffered a population crash with the decline of aerospace employers. Whole neighborhoods lay fallow for years, and Palmdale airport was closed for decades.

  22. Richard Kline

    So Ed, I'm not sure that I would accept the term 'malinvestment' for the Victorville ticky-tackies. Not that I disagree with the main points of your post. And surely from a societal standpoint, our exurban sprawls, this included, are malinvestment.

    The purpose of capitalism in our place and time is NOT 'investment' in any sense of the word though. That is the ad-speak, but no part of the reality, and to me it is important not to accept, credit, or pass on the ad-speak. The purpose of capitalism is to extract value, preferably the surplus value of others, for a share of personal gain or advantage; y'know, to 'make money,' profit and all that. 'Investment' is for the -end-user, in the dot.con parlance, some schlub left holding the product, paper, obligation, or office. As we see here again, the end-user _is not_ the person who makes the original enterprise action, the 'investment.' My point in saying this is that we are sold the illusion that the goals of the enterpriser align with the goals of the end-user in enterprise capitalism—but the DON'T, inherently, or seldom at all. Those goals align to the point of sale, but not before and most certainly not after. In short, enterpriser and end-user have tangential agendas though we are told via media parallax that these lie alongside. Depends on how one reads the word 'lie,' to me.

    For the enterpriser, these exurban boxes were only malinvestment when their ability to on-sell them was interrupted. It wouldn't matter, for their purposes, if these houses were made of, say, toxic waste; were in Mogadishu with a long commute; were even non-existent. The only things which matter were a) the on-sell, and b) severance of further liability. Those achieved, these soylent waste dump housing ulcers were fantastic investments for their enterprisers, in this case the developers, mortgage brokers, and public officials on their quid pro quo rolls.

    Even while cancerous Sprawlvilles like this could be conceived as malinvestment in the societal sense, to me this is false too. Society never chose or endorsed to build these abominations. More of them have been and are opposed by those who live in the areas where they metastasize than endorse them. Those who endorse and build these things are a 'ring,' a gang of traders, in it for themselves if with different purposes and profit points. It is more accurate to say that society has been unable to _resist_ inappropriate development. Because the enterprisers have the money and the 'deciders' in their pocket, and enough general contractors to make it look like they're booming 'employment.' In that sense, these places were _never_ an 'investment' but more a foreign growth imposed on the whole for the profit of the few, the consequences be damned because they would accrue tot he many.

    Enterprise capitalism isn't about 'investmet' unless one holds what one makes or buys. Once one _sells on_ what one makes or buys, there is no inherent alignment of interest between those pushing the process and anyone else. We don't think this way in the US of A, which is why we have huge private fortunes made over the last two generations vomiting unsustainable sprawls around all former urban centers. No one cares if these places are 'mal' or not as long as the check clears tomorrow noon. That is the thinking which rules all, and there is no 'investment' in that thinking, only 'profit.'

  23. Richard Kline

    Regarding urban planning, it's not that we don't have it, it's that we don't do it. Urban planning arose 120 years ago in its modern form, with streetcar suburbs and the transition away from wood in construction which made possible almost any development one could consider. Greenbelts? The idea dates to then, and even the Enlightenment. Look up L'Infant, and you'll see that urban planning has a long history. —But we don't do it. Because it is profitable to the enterprisers to steamroll their 'investments' right over the face of society, and they have the money and the power to do this, and the media to bamboozle the rubeocracy. And that rubeocracy wants to be bamboozled because a) they want to move away from 'social undesirables' in their former functioning urban centers, and b) have been sold on the idea that owning real property is their ticket to a comfortable retirement. Which b) is true as long as there is a greater fool to sell the stead too. Ponzi Acres, one could call it. Until population ages or drops, and key industries are exported out of the tax base, whereupon those properties plunge in value. But the enterprisers are long gone to their gated & guarded bubble clubs. For them, there was and is nothing mal- in these investments.

    Detroit was totally hollowed out by white-flight. The formerly vibrant working-class portions of its south and west emptied for Sprawlvilles, and the industrial plants that drove the tax base went South, and then South of the Border. The Big Brother of ethnic flight and deindustrialization _is_ the City of the Strait. And even bulldozing won't solve the problem given the volume of literal toxic waste left behind.

  24. Richard Kline

    When in due course the social history of fin de siecle America is written, a few more than now will grasp just how intrinsically the 'anti-tax' movement was bought and paid for by the Ponzi Acres oligarchy, pushing 'loath your other-colored neighbors' as their drive train. Think through what I just said and you will understand everything that happened on-shore USA over the last thirty years. I'm not talking 'conspiracy,' the pieces of this foul puzzle were just lying there, and the party of The Big Lie just picked them up and ran with them.

    —And California Sprawlville really was the petrie dish which grew this political, financial, and social monstrosity. A generation of wildly profitable sprawl there had pushed up property prices, but property taxes progressively bracketed the rising statements of all. This was a brake on Further Acres, and the fabulous profits dreamt of there. And said property tax revenue could be used for things like urban schools and transit; used by social undesirables, natch. Building on wetlands or in other unviable areas was also a sin against Mother Nature at least, and nascent environmental laws, popular with the great majority of the public, laid a few twigs in the path of the enterprisers. "Get the government off our backs." "[Low] Flat taxes!" "Unstable tree-huggers." "Eco-terrorists and liberal socialists!" Yeah, right.

    By capping property taxes, eliminating progressivity in them and in income taxes, extorting 'development' give-backs from bought-and-paid-for local twilight zoners, whipping up racial anxiety, and dangling the prospects of personal enrichment through continual assessment-creep driven by ever burgeoning supply, we've had a wealth-machine for insiders, many if not all of which bandwagoned in one particular political party. Get the picture now?

    Tax-haters of '78 puppeteered by big development money and big finance behind them lead straight to where we sit in '09 with big finance taking it off the other end out of the Treasury to soak up their Ponzi Acres' misfits. That's right: those who bankrolled the whole 'down with taxes' thing are making themselves whole by . . . entailing public tax revenues to their own continued wealth.

    Sheeple. I live in a realm of the first vertebrate organisms known to reproduce without brains at the core of their central nervous systems. —And yet as of today, nothing has changed. The rubeocracy huddle in their ticky-tackies, clutching their mortgage documents and 491(k) statements, hoping 'things will come right,' and they'll still finish in the money. Sheeple—on a spit and turning, but they don't even feel the motion, only the heat.

    Word verification thinks this is and 'ideacale,' which must be a debacle to a higher power.

  25. jerrydenim


    Quite a comment. I couldn't agree more. Your three part comment comes as close to a honest explanation of America's current malaise as anything I've read recently. I especially agree with your comments concerning the Friedmanite flat taxers and the misanthropic economic policies of self proclaimed libertarian factions that succeeded in hijacking the Republican party. I also appreciate your point of contention concerning the meaning of "malinvestment" but I think malinvestment is still malinvestment if collective resources are diverted towards a scheme that only enriches a few at the cost of many. Of course the beneficiaries of this 'malinvestment' might be quite pleased with their returns but from the standpoint of society it is still a horrible outcome and a poor use of resources.

    I'm well aware that urban planning is not some new science but an ancient art. Perhaps I misspoke, by using the term "bad planning" what we've had in the US is mostly a utter lack of planning, but in a few well documented instances city planners (Robert Moses comes to mind) aggressively promoted a sprawl/car-based lifestyle/planning model by attempting to dismantle existing public transportation networks and destroying neighborhoods with Berlin Wall-esque superhighways. Mose's legacy was the urban decay and the misery visited on New York City in the 1970s. What I think I was really trying to say in my earlier post was most of the problems American communities are facing today have their roots in the American love affair with the automobile. Yes of course interest rates, politics, tax policy have played a part but look at the common thread running through all of these overbuilt blighted cities and then look at what vibrant American cities have in common.

    Flint was one of the first urban areas to feel the pain of American decay because they were the epicenter of the American car culture. GM headquarters before Detroit. Victorville would have never been conceivable without the car. Social polices and other motivating factors aside, white flight out of Detriot, Memphis and elsewhere would not have been possible without the car. Exurbs with no public transport link cannot exist without the car. An entire population trending towards clinically obese because we have sedentary lifestyles made even more sedentary because we drive everywhere and then compound the damage by eating toxic meals out of our cars would not be possible without the car. Americans in places like Houston Texas might get off of their fat asses and walk somewhere if there was somewhere they could walk. The entire place is a 105 degree sweltering concrete superhighway deathtrap with no sidewalks. Walk? Where? How? Once again this fat, isolated, unhealthy, sprawled out city could not have happened without the car.

  26. jerrydenim


    This may be a stretch, but if we were all stuck living on a tiny primitive island or inside of the walled city states of old, right-wing fans of Ann Rand and Milton Friedman wouldn't have the option of living 30 miles outside of town in their ivory towers with their foolish, selfish ideas they would be forced to live among the people who suffered from their disastrous policy decisions and would perhaps change their ways and their thinking. The car enables the isolation/escape of one strata of society from another and enables the ignorance and apathy of the privileged classes.

    Better planning (denser more connected communities, parks, sustainable development, etc.) greenbelts and razing blighted, unserviceable, ungovernable neighborhoods in order to permanently rezone them as green space are the only chance many American urban areas have to reinvent themselves. I agree 100% with your narrative concerning the causes and effects of American decline. Its first draft Gibbons, but don't discount the ability of better urban planning to build a happier, healthier, more vibrant and economically robust city. I do realize this does require political power, and as such was not possible in the aforementioned era of Reagan/Friedman where the government was always the problem and never the solution. I hope we have better days ahead of us at least with respect to enlightened ideas concerning community involvement and sustainable lifestyles.

  27. Alex

    The US did produce some great urban planners over the years, the only problem is that few were listening. Jane Jacobs comes to mind. Toronto owes much of its relative success to her, in comparison to another Great Lakes city like Detroit, of comparable size and economic profile, at least in the post-war era (ie manufacturing and auto industry).

    Anyone with even a passing interest in modern urban design should pay a visit to Toronto some time. There are stubs of expressways all around the city just itching to penetrate the downtown core that were stopped in their tracks in the 60s and 70s.

  28. Anonymous Jones

    I love this site and I generally like Edward's posts.

    [begin sarcasm] And now I am super-duper excited to have found out the main reason why people make bad investments. Just think, as long as we fix the interest rate problem and then proceed to deregulate every market, no one will ever produce a good that can't be sold for more than production cost. Never a malinvestment again! Problem solved!

    [end sarcasm] Great comments, RK and jd.

  29. Edward Harrison

    Anonymous Jones: :)

    You all have grown soft. I have to self-flagellate a little for conflating Detroit/Flint and Victorville. (Tom Lindmark picked this up on Credit Writedowns)

    But, trust me, I will have more to say on this topic at a later date, but I appreciate your going soft on me and letting me off this time.

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