Inequality Indicator: Retirement Homes in Secondary Tourist Area (Door County) Bid Way Up

Yves here. Those of you who know and love Door County (a peninsula in Wisconsin with Lake Michigan on one side and Green Bay on the other) may be offended at it being called a “secondary” tourist area. But it almost entirely a regional holiday destination, laid back, outdoorsy, with lots of hiking and biking trails, sailboating and canoeing, camping, three summer theaters (one which gave Harvey Korman of Blazing Saddles and Carol Burnett Show fame his start), some small and pleasant beaches, and Al Johnson’s in Sister Bay, famed for goats on its roof.

I visited Door County for the first time last summer and was struck by how middle class it seemed. Even more so than Maine (which depends heavily on tourism but also has fishing and higher education as important sectors, and still some manufacturing, from the famed Bath Iron Works to smaller operations, such as mattress and furniture makers), it was exceedingly tidy and twee. But I didn’t see any borderline top 10% vendors, like Whole Foods or Ralph Lauren. Maybe I missed them, but their absence or scarcity made it seem particularly family friendly.

Recall also that Door County (again arguably like Maine) hasn’t been a prime target for retirement due to the winters. Dealing with snow is a nuisance, and runs the risk of falls and heart attacks, plus it requires a more extensive wardrobe and also shortens the life of cars (salt on the undercarriage).

With that as background, consider this reader report. And remember: if retirees of modest means are having a hard time finding small houses to buy, how are less well situated older people and on the whole financially disadvantaged young people going to get on?

By Jerry B

Over the weekend my wife and I were talking to a real estate agent up in Door County Wisconsin. If you are not familiar with Door County it is a peninsula in upper Wisconsin with the literal Green Bay on one side and Lake Michigan on the other side. It is a very popular summer destination for families as they have a lot of campgrounds and cabins.

The main city of Door County is Sturgeon Bay, WI. Sturgeon Bay has a large shipbuilding company that does mostly cargo ships. Sturgeon Bay also used to be the home of Palmer Johnson yachts/ships but Palmer Johnson was sold a couple of years ago.

My wife and I at least once a year rent a cabin near Sturgeon Bay. One recent time up there when Palmer Johnson was still there, we were driving across the bay bridge and parked in the water was a beautiful ship. It was Palmer Johnson’s DB9. If you have ever seen the movie Overboard it is that kind of ship and has a crew of 12. It listed for $60 million. It was waiting to go to the Mediterranean as a charter company bought it for it’s charter business. To charter the DB9 for one week is $100,000.

Given its location between Green Bay and Lake Michigan you can imagine that Sturgeon Bay and Door County are heavy boating areas with a lot of yachts parked in the bay during spring and summer.

When I was in high school I knew quite a few families that went up to Door County for vacation and camping. Due to the many campgrounds in Door County it was an inexpensive vacation for families.

That is still very much the case today but as with the rest of society things are changing. When my wife and I were up in Door County last year while driving around we noticed a lot of new and expensive housing being built especially on the Lake Michigan side.

My wife and I are looking at Door County as one place to live during our retirement. So we wanted to get a sense of the market for people on a limited budget. We had seen some areas that had small affordable houses. The real estate agent said the small affordable houses do not last long on the market. The agent also mentioned that like many areas around the country and the world, the vacation areas are becoming expensive as many people with money to burn are buying houses and property in these area.

There are many pricey homes being built in Door County. The agent mentioned one home that is only 1400 square feet and it is listed for $250K. She also mentioned that builders are not building apartment complexes or affordable homes but are going after the higher end homes.

Here comes the moral or lack of morals of my story. The real estate agent mentioned that she had one couple who “cashed out” some of their financial assets and bought a $500,000 house with all CASH.

Like a lot of people I think we need a wealth tax or some means of leveling the scales. The MSM focuses too much on income inequality and not enough on wealth inequality.

I think many people do not realize how much wealth there is in the US and the world so I wanted to give one example. IMO nobody should being buying or paying cash for a $500,000 when there is poverty and homelessness in the US.

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  1. PlutoniumKun

    I think this is a very complex issue – its not a straight negative or positive that retirees are using accumulated wealth to move out to rural areas.

    Retirees bidding homes beyond the means of locals is a problem in many regions and countries, although the impacts are not always negative. Many countries have used retirees as a way of bringing more people and money into declining regions – Taiwan, for example, has for years actively encouraged Japanese people to retire to its rural areas – mostly these are people of modest means who find Taiwan (or Thailand) cheaper places to retire, and in return they bring their custom for local shops and businesses and live in homes that may otherwise be abandoned.

    A French acquaintance told me that in her village in the Dordogne people were initially hostile to a wave of English and Dutch retirees or downsizers coming to her area – but they rapidly changed their minds as these people restored houses, revived old boulangeries and restaurants and set up nice guesthouses, bringing more tourism in. A key issue perhaps is that the village was an old bastide, full of small houses rapidly abandoned by locals, but perfect for retirees seeking somewhere small and central.

    In Spain and Portugal its a very two edged sword. Retirees bring money and investment, but also drive up prices of property and just everyday things like food and eating out. But they also (so far as I’m aware – I’m not sure this has been subject to detailed study) have underpinned local medical systems – essentially the public health systems run a surplus treating these retirees and charging their home countries/insurance, so benefitting all local health users.

    A clear distinction needs to be made between retirees and second home owners. Second home owners rarely do much for the local economy or community, their influence can be almost entirely malign. Retirees on the other hand can be a benefit to declining areas.

    There is a bigger question of course as to how this is funded. There is no doubt I think but the driver for retirees using cash to outbid local people for property is accumulated property values in their own cities. Smarter older people are cashing out at the top of the market in London or New York or Hamburg and buying themselves somewhere nicer and cheaper for retirement. Many retirees fund their country retirement place from rent from their own home – a huge proportion of the hundreds of thousands of British retirees in Spain or France are funded by rents from their houses in London or Manchester. A cousin of mine, a nurse, is funding her retirement home in Ireland from rent from her NY apartment, with 30 or more years of accumulated value meaning she should have a very financially comfortable retirement.

    You can of course also argue that its also important in big, congested cities that older people are moving out, leaving their homes (whether selling or renting) to a younger generation. In countries (like Ireland) with low property taxes there is a big problem with housing stock being effectively underused because retirees are living in big prime urban houses rather than downsizing out of the city. There has been plenty of discussion in Ireland in providing incentives (and taxes) to encourage retirees to move out of prime property to free it up for a younger generation.

    Of course, the bigger question is whether it is equitable that a generation has built up so much wealth simply by holding on to houses – as we all know, this may not be available to a younger generation. We need to reduce housing costs and we need to spread wealth more – but that means not just taxing property, it means ensuring retirees are not left without their savings (as Brexiteer retirees may rapidly discover, you can’t always guarantee your home will provide you with retirement income).

    1. Sanxi

      It is a straightforward issue that you have made complex. Nor have you addressed the thesis. NC insider or not. Another argument by gibberish.

      1. lambert strether

        If the issue is that simple, surely you should be able to explain it? As opposed to insulting the commenter? Just a thought

    2. TroyMcClure

      the jackpot will sort out this faux complexity. your connections, ability to start a fire and deadlift will determine more than anything else sooner than either one of us will like.

    3. JohnnySacks

      Those retirees will be cashing out those homes as they filter into the $9,000+ per month assisted living complexes that will start popping up around retirement community hot-spots, designed and located explicitly to strip that wealth. And there will be fewer and fewer customers lined up to buy them as the following generations lose their ability to duplicate the lifestyles of their parents. And what jobs are there going to be in those semi-isolated areas other than low paid service jobs? Even assisted living communities keep very few RNs on staff, mostly LPNs.
      Might take time, but it will all come around.

  2. Friendly

    Why couldn’t the moral of this story be about the yacht (or skilled shipbuilding work moving overseas, for that matter)?

    1. Confused

      Looks like I made some bad choices in life. Instead of working my ass off producing more than I consume and saving up the difference I should have been some low life deadbeat laying around smoking pot, screwing, and watching Oprah reruns. Just never believed that this country would ever become a socialist utopia. Man, was I wrong

      1. Sanxi

        No one is attacking you. Chill. They are in despair. Consider: not everyone has had the same opportunities to exceed.

  3. a different chris

    I liked the post, the below is just nitpicking:

    >one home that is only 1400 square feet and it is listed for $250K.

    That is a little overboard for a “nowhere” area, but in normal, we’ll call them “areas of commerce” that doesn’t seem too out of wack? And I live in Western Pa, which is hardly a real estate hotbed.

    I’m a little confused by this:

    > IMO nobody should being buying or paying cash for a $500,000

    What do you mean? They should be borrowing it? How old are they? No houses anywhere should cost 500K?

    1. TroyMcClure

      No one should have that level of liquidity. Seems like a simple premise one has to try to not understand.

  4. scott 2

    “Amazed at how middle class it seemed”. Sturgeon Bay actually had a downtown department store until last summer, when the Younker’s chain got the Toys-R-Us treatment. Fun fact: there are no big box stores or chain restaurants/franchises north of the Wal-Mart in Sturgeon Bay. One of the reasons my wife and I have have been visiting there for 20 years (and now own a condo there) is that it reminds me of what my hometown in Michigan was like when growing up.

    In the past 20 years we’ve watched the Sturgeon Bay economy rise and fall with the shipyard, though there are a lot of small manufacturers that seem to be doing OK. The peninsula itself has a shortage of construction workers and tradespeople, meaning long waits and very high prices for building, upgrading, or even maintaining a home. Then there are the logistics of getting building materials from Green Bay..Ergo, new construction is going to be expensive..

    As for our condo, our township decided to have every property re-appraised at their expense to see if they could collect more revenue. Our unit was appraised 15% lower than the previous year. Like everywhere else, anything with a water view gets top dollar, but just back from the coastline properties are much cheaper and stay on the market quite a while.

    After living through 30 TX summers, the wife and I plan to sell our house here and buy a house in Door with….CASH. I’ve never been a fan of borrowing money for a second or retirement home.

  5. efschumacher

    Oh, so we sold our house in the US which had 2% left to pay off the mortgage – “cashed out our asset” in these terms, and paid $400,000 cash for a house elsewhere. Is that the problem you’re talking about? People benefiting from the fact that they actually paid off their mortgage by retirement.

    I think your argument needs a bit more perspective.

    1. Eelok

      Yea, I’m also confused by what sort of point is supposed to be made at the end. “Some” of their assets could be half, or two-thirds. Was this a vacation property or was it their new primary residence? Are they retiring? Two people with a combined net worth of say, one million, assuming they don’t have pensions, are set for a pretty modest retirement; especially if half of their assets are tied up in real estate.

      Interesting data point otherwise. Here in Southern Ontario, there are many super-luxury vacation areas and many others that are rising quickly. What remains affordable is anything that’s a 3+ hour drive from the GTA.

    2. Jerry B

      My point was not to begrudge anyone for living well in retirement. Or doing everything right in their life and enjoying the fruits of saving their money, investing well, etc. etc. I read somewhere that if you live a long retirement you will need $240,000 just for healthcare costs. So I get it.

      My point was that a lot of people cannot afford a $500,000 house, let alone be able to pay cash for it.

      I am showing my age as being 60 I remember the house I spent the latter half of my childhood in my parents bought in 1971 for $29,000!

      So my value system says when there is so much poverty in US then no one lives in a $500,000 house.

      I have mentioned before that what I see in the US and other major cities around the world is “exchange value” costs of living and not “use value” costs of living. And many people at the upper income classes paying exchange values for things which drives up prices for everyone else.

      For a more nuanced view I thought PK’s comment above understood the point I was trying to make.

      1. John Mc

        I think you make a very persuasive case Jerry.

        On the other side of Lake Michigan, we are seeing the very same thing in areas near Traverse City, Sleeping Bear Dunes, and more northern communities of Sheboygan and Petosky.

        Point well taken

        1. Phacops

          Exactly. This is exacerbated by the fact that where I live, in Benzie County a full 30% of households do noe earn enough for life’s essentials. See the ALICE project, Asset Limited, Income Constrained, Employed . Plus, the local tourist industry keeps wages down by abusing visas, and property owners can make more money renting a few weeks in the summer than to a year-round family.

          The ignorant and stupid explanation in this neck of the woods is that we have an affordable housing problem when it is a problem of the lack of a living wage and the distortions of a tourist economy that privatized profit while socializing harm.

      2. kevin

        I guess I understand your point about $500k houses existing while a large portion of the population struggles to eat or access healthcare (although living in DC where those two populations actually overlap ever so slightly I don’t necessarily agree).. but why is being able to pay with cash an issue? Either someone’s living extravagantly or they’re not. Why does it matter whether they have saved up a nest egg over a couple decades+ or are relatively young with limited savings?

        1. John Mc

          Re: Paying cash from non-local out of town purchases (often second home or vacation home) drives up the prices for the entire area where people have lived their entire lives. I do not read Jerry as being anti-cash here, but being concerned about being priced out of the market in a relatively short period.

          Let us not forget some issues like homes closing faster when paying cash, the seller often will side with the purchaser who is more likely to close using cash versus bank loans, and this particular area of the country is the home to the second largest fresh water resource on the planet. People are sensitive to outside money coming in and buying up, inflating real estate for part-time residents who are not invested in the communities long term health beyond their own individualized needs.

          This is my take on what Jerry is saying

          1. scott2

            The Door County Land Conservatory is buying up whatever coastal land they can get to keep Door from looking like south Orange County.

        2. Yves Smith Post author

          The point is not $500,000 homes.

          It is that people have enough in the way of financial assets that they can sell them quickly to make an all cash purchase. They almost certainly have equity in a home on top of that. You can’t sell a house quickly to make an all cash bid. And the broker clearly said that buyers were selling assets fast to make these offers.

          1. Left in Wisconsin

            Door County is the Cape Cod of the midwest – like CC, much more accessible to major population centers than most of Maine – and will suffer the same fate. (Lots of second homes for the wealthy but also lots of middle-class baby boomer retirees who seem to not mind brutal winters.) As said above, there is a lot of wealth in this country. Just looking at the wealth in metro Chicago and Milwaukee (even discounting the truly wealthy for whom Door County is kind of meh) is enough to explain rising home prices.

            1. Yves Smith Post author

              Huh? Door County is MUCH further away from “major population centers” than Maine is, through, say Boothbay Harbor or Daramiscotta (both of which are north of Portland, Yarmouth, Freeport, and Bath).

              It is an almost 2 hour drive from Green Bay, which is not a “major population center” to Sister Bay, about halfway up the peninsula. Green Bay to Sturgeon Bay, which is where the high tourist action gets going, is about 50 minutes.

              Chicago to Green Bay, by car, is over 3 hours, so you are talking over 4 to get to Door County.

              By contrast, Boston to Portland, Maine is UNDER 2 hours. To get from Boston to the island at which we vacation (Bailey Island in Casco Bay) is 3 hours. From Providence to Portland is still 1/2 hour less than Chicago to Green Bay, let alone spots in Door County. Door to door from NYC (flying, getting bags, car rental process, driving) is 3 1/2 hours if you don’t have a problem.

              1. scott 2

                It would be interesting to know the trend of jet fuel sales at Sturgeon Bay airport since the GFC. There seems to be fewer jets on the tarmac in the summer than a decade ago. Whether this is because of the economy or the fact that Appleton (a 2 hour drive) has a more jet friendly facility and mechanics is unknown.

          2. kevin

            But why is “liquidity” with regards to a person’s net worth a problem?

            Plenty of middle class workers have managed to save 500k+ over their 3 plus decades working, even without considering the value of their home. Does it matter whether they invested it into stocks/bonds or a more illiquid pension fund? Are you arguing its a problem if its invested in stocks?

            I’m having a harder time understanding this argument then the one that a 500k house is overly extravagant or that having x amount of wealth is extravagant. (I agree with this arguement, although I think 500k is perhaps too low)

  6. JoeT

    “wealth inequality” There is 5+ trillion in 401Ks. Now there’s some wealth to tax. I’m sure nobody would mind getting taxed on what they earned and saved and seeing that money go to “the deserving” – as defined by politicians.

    1. MJ

      I think most of it does get taxed . . . eventually.

      You must begin taking Required Minimum Distributions or RMDs after reaching the age of 70 1/2. The RMD for a specific tax year is based on your age and the balance in your account at the end of the previous year.

      1. JohnnySacks

        And that money I painfully added during leaner times has been skimmed for the last 30 years by the financial industry and made less valuable by inflation. But it’s all I’ve got and I avoided being taxed on the income when it was added and expect to be taxed when it’s removed. Ugh, libertarian infestations, like cockroaches in a kitchen..

  7. Mark Gisleson

    Everything Yves says is true, but she omits the REVERENCE many Midwesterners have for Door County. I’m not surprised it’s already pricey for most. The entire upper Mississippi River Valley is getting expensive thanks to Boomer retirements. Before too long, it will be hard to buy a place with a view of the Mississippi.

    Those of us just entering retirement understand climate change. Arizona and Florida no longer look that great to us. I’ll take the milder winters and cooler summers of SE Minnesota for as long as I can.

    1. notabanker

      Having spent a considerable amount of time lately trying to understand climate change, the only thing I truly understand is that we are exercising a grand experiment with the unknown. We should be pretty worried about every square inch of the planet. I certainly wouldn’t be buying coastal property, but the idea that one geographical area is better than another is a false sense of security. Weather patterns are already shifting, extremes are becoming more extreme and no one can computer model the earth’s ecosystem.

      Boomers retiring with a view of the Mississippi shows just how out of touch with reality they are. They’ll be on CNN in five years finger wagging the government for not helping them rebuild after they’ve lost everything and the insurance companies have carved out their coverage.

      1. Arizona Slim

        Once you get south of, say, Illinois, you won’t have any view of the Mississippi unless you’re standing on top of a levee.

  8. duffolonious

    I bet if you took a survey (short answer) “How much wealth is too much?” you would get widely different answers.

    Also, I bet if you historically mapped housing prices along Lake Michigan you’d see a price hike crawling the coast for years. I’ll bet someone like you (or me) was complaining about Manitowoc in the past.

    Also, because Peninsula it doesn’t get _that_ cold and n the Winter making it relatively nice for the latitude (hence all the locally made fruity wines my wife loves).

  9. William Beyer

    My spouse and I have vacationed in Door County; I grew up not far south of there. I was told that the reason you don’t see any Whole Foods or other chains in the tiny towns north of Sturgeon Bay is that they’ve been banned by the local governments. Another thing to know is that many miles of water frontage is almost entirely private; large stretches bought up by Chicago big bucks a very long time ago. The letter does seem a bit odd in its complaints, but the tininess of this very limited spit of land means scarcity is driving up the price of all real estate.

  10. Wukchumni

    Used to be there were 15-20 homes for sale @ the lower end of the financial spectrum for around $200k here in what really isn’t a vacation town (tourists come in the summer en route to Sequoia NP when it’s torrid and the scenery in the lower climes is flammable, while the best time to be here is from Nov-May, when it’s @ perfection with a plenitude of green, wildflowers & redbud) and then vacation rentals entered the fray, and now no cheaper homes, but a fair number from $500k to a million, as those ones don’t pencil out as AirBnB et al.

    The $500k number in terms of paying cash for a house wouldn’t be a great burden for a California equity refugee if they bought their former home a few decades ago, as it corresponds with the tax-free jackpot of the same amount if it’s a couple cashing in on quite a score when you think about it, NO taxes whatsoever, hell, you get nicked for something like 40% if you hit on a lottery ticket win, in comparison.

  11. Carla

    “How much wealth is too much?”

    In a country where tens of millions do not have healthcare, where life expectancy is falling, where every public institution is being looted and dismantled, where 40% of the population can’t come up with $400 to pay an unexpected bill, and where the best the national government can do is to wage forever wars and foment new ones, I would say “any.”

    1. pretzelattack

      heard that. i wouldn’t be surprised if there are some contingency plans drawn up to deal with any new bonus armies; i think that’s the tack the elites want to take.

  12. Norello

    My point of view is the exact opposite side of the reader report. I have to admit the suggestion of a wealth tax of under a million dollars has gotten me riled up. These people are not living extravagant lives by American standards in the least.

    What Jerry B is probably encountering is quite simple. Most of their wealth is tied up in their homes and they flat out can’t afford to survive in their current neighborhoods. They need access to their savings (equity in their home) and lower annual costs (15k a year property taxes). They sell their home for $650,000 and buy one for less with cash. They use the difference to supplement their other savings. In the long term the savings in property taxes can easily exceed the equity cashed out of the home swap.

    Who does Jerry B think people around that level of net worth are? I know them. They are my grandparents, he was a janitor and his late wife was the bookkeeper for the family business. They are union electricians. They are plumbers. Those are the people that need a wealth tax? Seriously?

    Jerry B is conflating the higher end of middle class with the spectrum of the well off. Also around here there are people that can buy thousand dollar pairs of shoes and cars worth over $100,000 like it’s nothing. In my opinion a higher income tax would be more appropriate to address inequality at that level.

    I know only one person that is truly wealthy. They were a vice president at a large bank. They own a second home on a golf course worth over five million dollars. The annual maintenance cost is $200,000 dollars a year.

    What I’m trying to say is that the ones living up like kings are not the ones with under a million dollars net worth. Supposedly what is considered rich doesn’t start until twenty million dollars. All I know is being wealthy in the United States doesn’t begin until well over an order of magnitude to what Jerry B implies.

    1. Yves Smith Post author

      When Jerry B said “pay cash” and he did not clarify the point above, he meant sell financial assets, not another house. If you read the broker’s comment, it was clear the “all cash” buyers were selling their assets quickly to make a bid on a Door County house. You can’t do that with another house.

    2. Jerry B

      Thanks Norello. I enjoyed reading your comment. My reader report was more of a rant out of frustration than an academic research report to be debated. But such as it is.

      ===Who does Jerry B think people around that level of net worth are? I know them. They are my grandparents, he was a janitor and his late wife was the bookkeeper for the family business. They are union electricians. They are plumbers. Those are the people that need a wealth tax? Seriously?===

      As I said in my comments below, I am not begrudging your grandparents. i.e. the millionaire next door. My mother’s second husband was similar to your grandparents. He did the right things. He had no kids but he and his wife worked hard and saved their money. Bought a small first house, sold that and bought a three flat in Chicago, sold that and bought a arguably modest (by today’s standards) ranch house in Bensenville, IL where he lived until he passed away a few years ago.

      But what allowed him to do that back in the 50’s and 60’s was a steady job (He worked as a maintenance engineer for Rush Hospital in Chicago for many years). He was never downsized, laid off, or part of the gig/temp economy. He had job security pre globalization.

      Also he was able to save a lot of money because the cost of living in the 50′ and 60’s was very low. There is a Wikipedia page referring to that generation as the Silent Generation. In the Wikipedia page one author refers to them as the “Lucky Few” who entered middle adulthood during the booming 50’s and 60s.

      Amongst the baby boomers, not nearly all, but more than you think have benefited not from living the type of life of your grandparents or my mother’s second husband, but from the Wall St, financialization, private equity, hedge fund, upward pre distribution, rent seeking, extraction wealth and income.

      When nearly half of Americans are unprepared for a $400 emergency expense and on the other side TOO MANY are buying and building posh McMansions and/or second vacation homes, then Houston we have a problem. But that is my personal value system

      1. TroyMcClures

        “My mother’s second husband was similar to your grandparents. He did the right things…Also he was able to save a lot of money because the cost of living in the 50′ and 60’s was very low.”

        He was a creature of his time not some saint that did all the right things.

      2. notabanker

        Hey Jerry thanks for the piece. I think it’s well done and is a sign of the times.
        I think the debate spurred in the comments is a judgement based on perceptions. 500K in terms of net worth is relative to your environment, and people are making assumptions as to how it was obtained.
        500K in real estate is relatively inexpensive if you live in Surrey UK or Northern CA. In Wisconsin and Ohio, that’s big money. In Thailand or Indonesia you can live like a king.
        Plunking down 500K if you’ve worked 30 years to save it is a huge sum of money. If you’ve made a couple of million in the stock market the last 5 years, then not so much.

        I think another societal norm that hurts us is the idea that we all ‘need’ nuclear family living quarters, or multiples of them. When I lived overseas, it was common for a ‘local’ colleague to finance living quarters on a middle class salary and have parents, siblings and siblings children living with them. Aunts and Uncles would be in the unit next door, or down the hall. Sometimes, gasp, that had to move in the building across the parking lot.

        I have a 93 year old Aunt. My cousins had to move her into assisted living. She absolutely refused to move in with either of them. Having her independence and not being seen as a burden to her own children is that ingrained in her. She grew up as one of 12 kids in a 6 room house, the daughter of a coal miner who died of leukemia when my father was 6. She’s bloody determined to prove to the world she can take care of herself to the very end. It’s just part of who she is.

        Again, thanks for the piece, appreciate it.

    3. jrs

      oh I’ll advise any millennial who is struggling with what to do with their life, to become janitors and bookkeepers to retire rich someday! Good advice. Oh wait that only applies to the boomers and that’s far more likely to result in outright poverty than great wealth these days.

      1. TroyMcClure

        Bingo! This plus the the anti-natalist/neo-Malthusian streak found here in the boomer commentariat gives me pause.

        1. lambert strether

          It’s a big Internet, even or perhaps especially for those who make bogus generalizations.

      2. lambert strether

        Consider making comments that have some relation to the original post? Clearly, Jerry B was not suggesting that

  13. chuck roast

    I rent in “Theme Town” for the fall, winter an spring. I describe walking around it as listening to an ancient choir playing beautiful music from a myriad of architectural periods. Like living along the arc of time’s arrow. Every day is a lovely day. But it’s kind of sad. There aren’t many people around, particularly children.

    In the summer the “Theme People” come to occupy their second, third or fourth homes. Don’t bend down to pet the poodle. You’ll get run over by a Range Rover. And the day tripping hoi-polloi clog the lanes with their ice-cream cones. I take-off in my beater yacht for the Gulf of Maine.

    What is to be done?

    Well, how about a “Mansion Tax”? A graduated tax on the top 10% of all valued property in “Theme Town”? It’s simply a rounding error for their accountants anyway. This is confiscatory and will pay for a desperately needed new high school, but it won’t change the “dark town” dynamics.

    Better yet, a “poll tax/stamp tax”. If you don’t vote here, you pay a sizable penalty annually to own your second, third or fourth house. This would give the town a bit more light in the winter and make housing a more affordable for the locals.

    Crush the Air B&B rent-seekers. I don’t need to belabor that point in this forum.

    I would love to hear more solutions.

  14. Tim

    For decades the idea of taxing wealth was unmentionable. Now that Elizabeth Warren had the temerity to propose a wealth tax, we find that most Americans support the idea and even the media is becoming accustomed to discussing the idea without using necessarily the words socialist or radical simultaneously. Now . . . what and who should be taxed and how much? Buckle up, its going to be a bumpy ride.

    The truth is that what we are talking about is preventing a massive lopsided transfer of wealth from $100 million ++ net worth baby boomers to their children and grand children. The numbers can be argued but probably around $25 to $40 trillion from a few thousand families that constitute the <1% in net worth.

    The federal debt is $22 trillion. Universal medicare for the next 25 years probably half that, college tuition for all an even smaller fraction. Or, we can make sure Donald Trump Jr. takes his father's place on the Forbe's wealthiest list.

  15. Wukchumni

    How out of whack are house values in some areas?

    The first home my parents bought in L.A. in 1960 cost $12k, it now Zillows for in excess of $600k. A 1,200 sq ft home-your basic crackerbox abode.

    To put in the same performance over the next 59 years, it would have to escalate in value to $30 million in 2078.

  16. Jerry B

    ===What do you mean? They should be borrowing it? How old are they? No houses anywhere should cost 500K===

    IMO nobody should being buying OR paying cash for a $500,000 house when there is poverty and homelessness in the US

    I thought that sentence was clear on what I meant but evidently not so:

    Commentariat– I am including here my reply to an earlier comment so it is clear what I meant.

    My point was not to begrudge anyone for living well in retirement. Or doing everything right in their life and enjoying the fruits of saving their money, investing well, etc. etc. I read somewhere that if you live a long retirement you will need $240,000 just for healthcare costs. So I get it.

    My point was that a lot of people cannot afford a $500,000 house, let alone be able to pay cash for it.

    I am showing my age as being 60 I remember the house I spent the latter half of my childhood in my parents bought in 1971 for $29,000!

    So my value system says when there is so much poverty in US then no one lives in a $500,000 house.

    I have mentioned before that what I see in the US and other major cities around the world is “exchange value” costs of living and not “use value” costs of living. And many people at the upper income classes paying exchange values for things which drives up prices for everyone else.

    For a more nuanced view I thought PK’s comment above understood the point I was trying to make.

    Lastly I pulled this quote from a Baffler link Lambert had on Water Cooler which I am modifying for this post.

    “We have to devise more constructive ways of debating and combating income and wealth inequality, because going off like a car alarm whenever we spot it isn’t working”

    I am glad Yves included my comment in this post. Many people are against income and wealth inequality, but what do each of us mean when we use those terms? I lived in the 60’s when the rich were one notch up from the rest. When the rich couple down the street had a slightly bigger house and a Cadillac car (which were still affordable then). Now the upper classes live in gated communities.

    A while back I posted a link about how many two and three flat apartment buildings in Chicago are being torn down and replaced with large McMansions. To me that is a problem.

    But that is my value system. So commentariat what parameters do you put around income and wealth inequality? Where do you draw the line?

    On another blog where I made a similar comment someone mentioned that I wanted everyone to drive the European/Russian Lada’s. That is not my point. I am all for people enjoying the fruits of their high intelligence, creativity, and inventiveness—-to a point.

  17. redleg

    Door county has a water problem.
    The shallow aquifers are in the karst, as are the septic systems. Peak groundwater virus season in Door County corresponds with summer tourist season. Bluntly said, you end up drinking what you (or your neighbors) flush. The deep aquifers have significant naturally occurring health concerns, such as arsenic and radium. These are things that locals may be aware of, but transplants wouldn’t have the slightest idea why they are constantly sick since moving there.

    1. scott2

      Don’t forget having to replace your shower heads every year from the iron in the deep wells.

      Our well is up on the bluff and there isn’t a cow for a mile and a half. We filter it but it’s soft and doesn’t stain.

  18. Jerry B

    BTW for those who cannot see the forest for the trees. Many, but not all, new houses built in the US are massive i.e. 2000+ and up with large vaulted ceilings, etc. How much energy are they using to heat and cool??

    A lot of the new housing I have seen in the Chicago metro area does not include solar panels and/or geothermal heating and cooling. So I would imagine that most McMansions are drawing their energy for heating and cooling from the same place: fossil fuels or nuclear. I am no energy expert so I do not know the nuclear energy comparison to heat and cool and 2000 square foot house vs lets say a small flat in London.

    A lot of the recent housing I see are just large boxes. Even with energy efficient windows, energy efficient furnaces, etc. it still is a lot of space, horizontal and vertical, to heat and cool.

    Yves has mentioned many times on NC about the future will require radical conservatism. According to my value system a $500,000, 2500 square foot, two story house is not radical conservatism.

    In the future we probably have a lot of energy inequality as well. And the beat goes on. Pitchforks everyone!!!

    1. PlutoniumKun

      You are right that large freestanding houses use far more energy than apartments. A lot depends on how you compare, but as a general rule of thumb, apartments use less than half the electricity and heating energy of a detached dwelling. Apartments also allow for denser living and so less energy used on transport – which is why the typical New Yorker uses far less energy than a typical exurban dweller, even if the latter has a highly insulated house with solar panels, etc.

      Building quality is also a major element – this is the primary reason why the CO2 emissions per person of countries like Germany, Sweden or Sweden are far below the typical USian or Canadian.

      And the figures in that link show that energy use per house has gone up, as savings made by more energy efficient appliances is eaten up by the simple reality of houses getting bigger and being stuffed with more appliances.

    2. Ignacio

      Yep! Some limitation to house sizes would be needed. If tax rates are incremental on salaries why not on the power of vehicles, energy spent on houses, waste generated etc?

      The logic of the market is that if you are a big spender you are a good client and deserve better rebates. That is exactly the opposite to what is needed figthing climate change. Rules should not promote more but less spending. But, “marketing” still rules.

      If you account prices by buildt area, those big houses, in comparable zones, are almost certainly less expensive in terms of $/sq.f. Looks OK under marketing prisma but totally wrong under “climate change prisma”. Regarding climatization, energy goes in three dimensions and energy requirements grow somehow faster than buildt area. When figthing climate change mode, flat rates on energy don’t work. Nevertheless marketing rules and those spending more usually have lower rates per kWh spent.

      That flaw should be corrected IMO.

      I would suggest “New Marketing Standards” under Green New Deal rules.

    3. kevin

      You’re confounding issues. Is the problem 500k+ houses, or Mcmansions? Condos use substantially less energy. But using your argument about 500k being too expensive, many of these super energy efficient housing units (especially when considering decreased sprawl/transportation costs )would never get built. It costs 500k+/unit to build 1000 sq ft apartments/condos 20+ floors high. It can reach 1 million on buildings greater then 50 floors

      1. Jerry B

        I disagree that I am confounding issues. The problem of McMansions and the energy required to heat/cool/power those McMansions is the same principle. Excess. Obscene Excess.

        To me it is the same logic as I have argued in another post about car prices. I do not live in an upscale area by no means and yet I see $50K GMC Yukon’s/Chevy Suburban’s everywhere! Aside from the cost they are huge gas guzzlers and environmental hogs. And usually there is only one person, the driver, in the SUV. When we are trying to keep more fossil fuels in the ground those types of vehicles should not be allowed.

        As someone commented on the same post, if you need a Yukon for the occasional vacation with the kids, rent one.

        ===It costs 500k+/unit to build 1000 sq ft apartments/condos 20+ floors high. I

        You make good points about the cost of building multi-family dwellings. That is another issue. And a problem of land use regulations, the NIMBYs, excessive regulations in general, and other factors.
        That is a problem that this country and the world will have to deal with sooner or later as more and more people are going to be clustering in urban areas.

        The metro area of Tokyo has 34 million people. Most live in high rises. Time travel to 100 years from now in the US and see how people are going to be living post fossil fuel era. IMO they will be clustered in urban areas i.e. living in high rises. Or you will see the rich living in gated, expensive, private army protected cities, and the rest of us outside living the worst parts of the Bible, exaggerating for effect.

        1. kevin

          I’m certainly not an expert, but I think you are overestimating how much of the cost is due to zoning. Are you claiming it doesn’t cost that much to build in Japan? A cursory google search shows it costs 50 million just to retrofit old skyscrapers to withstand earthquakes ( ), so I’m not sure I buy that. I’m happy to be proven wrong.. and that would go along way to back-up the 500k figure. (I agree with your argument, just not the 500k number)

    4. greg

      Much of the problem is that energy production is presently subsidized.

      Now, it is impossible to really subsidize energy production, so the price is kept artificially low by financial manipulation and diverting energy (by depressing demand,) from more economically productive uses. That is, by decapitalizing other, more productive sectors than the SUV and McMansion sectors of the economy. Like infrastructure. Manufacturing. Farming. Government. Etc. You know, the stuff we actually need.

      Subsidized fracking, and biofuel production, for instance, while useless at producing surplus energy, do keep the energy supply in surplus, and thus the price artificially low. And thus, also, consumption artificially high. With the added bonus that the development of alternative energy sources is discouraged.

      This cannot be sustained. The very unpleasantly surprised will be many.

  19. djrichard

    I grew up in Lake county, IL (which boarders Wisconsin) and we used to take our boat up to Door county many summers. Nothing fancy, a 16 footer with 100 hp engine, but good enough to do some water skiing behind. And a lot of people we knew had boats like that – nothing to brag about. Just more like a way of life. But the key bit is that we were all working class. My dad’s education stopped with the Navy as did a lot of other dad’s I knew.

    I imagine that way of life is pretty much over with. I’m a 10percenter now and I don’t know anybody who has a boat. Some of that is not due to being in Lake county anymore (I’m on the east coast now), where there’s lots of waterways begging you to go boating. But even if I lived back there, I suspect I would find that boating recreation is gone for the working class there.

    Getting back to Door county itself, we used to go camping up there mostly. But then my Mom was able to worm her way into a property to use, from a family friend. It wasn’t quite a cabin, but pretty close.

    Anyways, after many years, just went back to vacation there this last summer. But the first step was finding a place to stay for a party of 6. And for less than a week. The price made me blanch. It was basically resort-like pricing. Oh well, c’est la vie, if this is what it takes to make it work so be it, I thought. The place we ended up taking was much better than what we used to stay at before when I was growing up, that’s for sure. Some of that has to do with accommodating a party of 6. And a lot of that has to do with our requirements being elevated compared to back then. But when I was looking on AirBnB and VRBO, it seemed like all the places being listed were very modern (and large) homes. Not like I remember the area at all.

    Separate from that, the area was quaint like I remember it growing up. In fact, it was even nicer than I remember, as when I was growing up I didn’t really absorb the natural beauty around me.

    We rented a boat for a day and that was expensive, but then renting a boat in the area up there always seemed to be expensive. So hard to compare that, especially given that we would bring our boat up rather than renting back then.

    Lastly, we ended up continuing our vacation by driving up to Mackinac Island by driving back to Green Bay and following the lake through Wisconsin and the Upper Peninsula. Now that is geography that reminded me of the slow working class existence that I had in Lake county, IL. I could see some new properties being put up along the lake, but even then I don’t think the pricing is anywhere near what it is in Door county. Now if I could only convince my wife that we retire up there, lol that ain’t going to happen. I suspect we’re going to retire in spot and just use whatever money we have to visit whatever strikes our interest. That’s how it’s been since we’ve been married.

  20. DJG

    Some notes on the comments and on the post:
    –Door County is not quite as middle class as it seems. In general, though, you don’t have resort towns as exclusive as places like the Hamptons in the East or Monterey in California here along the Great Lakes. Yet Door County has a long history of being the place where rich families summered–from all the way back when the paterfamilias would send the whole family away and join them later or on weekends. There’s a Lake Forest, IL, contingent in Door County.
    –It may be that the resort towns around Lake Michigan aren’t as exhorbitant because things are spread out. People also go to inland resorts for fishing or eating or relaxing: Northwest Illinois (Galena) or Southwest Wisconsin (Monroe). Yet there is the “Chicago Riviera” around Michigan City and New Buffalo.
    –Door County has been a bone of contention for a long time. It is strategically placed in Lake Michigan, and Green Bay is the mouth of an amazing system of rivers and lakes. So trade flowed up Green Bay toward the Straits of Mackinac, controlled by the Odawa (Anishinaabe).
    –The many comments on housing in Chicago are apt: We are in a weird phase here of people buying two-flats and converting them into palazzi for the two adults, 1.5 children, and the Pug. Across the alley from me, the church that lost its congregation has been replaced by two houses, with about 3,600 square feet each, on two floors and what used to be called here a raised or English basement. Now it is the Postmodern Subterranean Lounge, I guess. At $1.2 million a pop. Three-car garages. They are symbols of environmental doom, eh?

  21. Tomonthebeach

    This is more a story about small-town/urban-town than it is about wealth inequality.

    The people gentrifying Low-cost Paradise are not necessarily the 1%, but just folks retiring from the big city. When one sells their middle-class house in Chicago for $750K, they can afford to write a check for $500K to retire on Green Bay. At urban real estate prices, there is still enough residual to buy a 1BR condo in SC for winter.

    Having relocated 15 times as an adult, I have observed that most residents of Small Town America (STA), and even smaller urban centers are clueless about what it costs to live outside Mayberry RFD or Kansas City. They assume that their lives ARE middle-class America. They do not hear about traffic jams, shootings, tax hikes, etc. and do not see the assessed valuation of their homes increasing with each year’s tax assessment.

    We live on the beach in STA, and are bracketed by much older and less pricey houses than our 25-year-old neighborhood. Those little houses were built 50+ years ago for a different generation (starter homes) and times (the now-defunct NASA boom). The homesteaders have mostly died off or were transferred by their aerospace employers. Roughly 70% of the homes are now rented mostly to several sharing singles or small families.

    With that much rented real estate, the area is in decay. Recently a 6 square-block area across from the beach was bought up and leveled to make room for a massive high-rise condo and several-hundred minimansions that will go for about $850K/unit and up. Most employees of the local aerospace sector live on the mainland, but their executives and Boomer retirees have found our Paradise Lost. It was inevitable.

  22. SteveB

    Back in 2004 I couldn’t understand why people were bidding up and paying high prices for houses. I thought they were nuts. So I sold my house and rented for a couple of years.. Took a lot of heat from my family.

    In that period I studied, read and began to understand how “family blogged” our monetary system is.
    People go nuts when they can borrow easily. I’m talking everyday people as well as wall street types
    It finally blew, I bought another house fixed it up and I couldn’t believe they doubled down on loose money.

    They bid up stocks and bonds and housing followed..

    I sold my house last fall and bought a condo…. while I wait..

    Human nature never changes…

    The problem is loose money… When the price of money is free, money has no value, people treat it as such

    1. Jerry B

      ===Human nature never changes…The problem is loose money… When the price of money is free, money has no value, people treat it as such===.

      Thanks Steve. Recently I came across an author named Vance Packard either on NC or somewhere else. So I googled the guy and found out he was an American journalist and social critic. He was the author of several books, including The Hidden Persuaders. He was a critic of consumerism.

      So I looked him up at my local library and found and checked out a few of his books. Mind you my assumption was that most of his books referred to present day.

      One book was called the Status Seekers and I was sure it referred to our society of the last 30 years or so. The copyright was 1959!!!

      Another of Packard’s books was called The Ultra Rich: How Much is too much?? Again I thought he was referring to today’s society. No again. Copyright 1989. Sigh.

      Lastly a book called A Nation of Strangers. Again after reading Robert Putnam’s Bowling Alone I thought Packard was discussing current day. Nope. Copyright 1979. To be fair Putnam’s Bowling Alone surveys the decline of social capital in the United States since 1950. So he and Packard seem to cover the same turf.

      As you say, what is it about human nature that we just refuse to learn? Nothing changes. Sigh. It’s like the people on Easter Island who cut down the very last palm tree and then went “Oh Crap we screwed up.!”

  23. kareninca

    I just looked at Sturgeon Bay real state on Zillow and it sure looks reasonably priced to me. You can buy a 4 bedroom, 3 bathroom, 2954 sf. house on .32 acres for $204,500:

    Quality executive home in upscale neighborhood. Glowing floor plan for family living or entertaining. Insulated sunroom off of family room for 3 season use. Private patio. Open viewing from the dining room to the family room with Door County field stone fireplace. Only a few steps up to 4 spacious bedrooms. Finished game room with bar in basement for fun and games. 3 Blocks from YMCA and parks. Close to schools. New roof and new driveway completed in 2017.

    From the photos it looks like it is in good condition.
    I wouldn’t want anything so enormous; this is just an example. You can also get a 2 bedroom, 2 bathroom house on .35 acres for 119k; it looks fine inside and out.
    It’s true that there are some very costly houses as well.

    Maybe I’m missing something but this still seems a very reasonably priced area. If I had to guess I’d say that some people really want a new house (not me, I like old ones), and that those go for a premium.

  24. kwc

    My parents taught me to be frugal. Bought my first house when I was 23 for $39,500. It wouldn’t meet the standards of millennial buyers. Not even close. After several more houses bought and sold, got totally out of debt after enduring double digit mortgage rates in the 80s. I continued to live below my means so, yes, paid cash for much more than a $500,000 home. A life of daily Starbucks and takeaway from Whole Foods does add up. I am 65 and my children are learning to live below their means. You either pay interest or collect interest. Choose what side to be on. It takes sacrifice but gives you economic freedom.

    1. kareninca

      You are a member of an economically fortunate generation. Yours is more fortunate than my generation (I’m 55 y.o.), and my generation is more fortunate than that of the millennials.

      I have always been frugal too. Very frugal. I’ve been to Starbucks perhaps five times, each time only when socially required. I do not shop at Whole Foods. But – my first rental in San Francisco in the 80s was a tiny closet for $104/month. I was able to save money while working at a part time job at $5/hour. I have no illusion that some young person these days would have the financial options I had. There used to be a book – “Eat Well on $1 per Day.” Then it was reprinted – “Eat Well on $1 per Meal.” Now – who knows. Have you priced groceries lately? Wages have in no way kept up; not at all.

      If I were in my twenties and read your post I would be very upset. Of course thrift is good, but thinking that current young people (or older people who have had an economic setback beyond their control) can do what you did if they just skipped the Starbucks and the Whole Foods takeaway, is just not correct.

      1. super extra

        I am in my 20s and the comment does not really upset me because I’ve been hearing this bs my entire life while watching this same generation continue to take more and more and more while refusing to step aside from positions of power. The constant insults appear to be a way to shield themselves from reflection and self-criticism, to continue convincing themselves that the struggle and sacrifice they made was worth it.

        It’s sad that someone in such a position of relative security compared to my generation feels the need to insult and belittle to make themselves feel secure, but thankfully, they’ll be long dead when I’m their age and the world is burning to a crisp and we’re all eating bugs to survive. I won’t have to worry about the fear of surviving on cat food in my massive, fully paid-off sarcophagus of a home. They never had to worry about taking sex or gig work simply to avoid living on the streets, because their three part time jobs weren’t enough to pay overpriced rent to someone who inherited multiple properties. If only we still lived in a society, it may never have come to that for either of our generations.

        1. Yves Smith Post author

          This is not just a matter of age. Plenty of older people who lost their jobs in their 40s or 50s, or had a serious medical ailment (see the thread today on cancer) or had a costly divorce are worried about eating cat food and/or being homeless.

        2. Oregoncharles

          I’m 73, one year older than the Baby Boomers. I’ve spent considerable time mentally writing a letter of apology to your generation. Much as some of us tried, evidently we screwed things up royally. Or perhaps it’s just diminishing returns having their way with us. In any case, you clearly have a good point. I just wish an apology was worth writing. At least here you have a clear idea of the situation. Perhaps you can find a way – because at this point, it’s ultimately up to you.

          On a more personal note: you’re very eloquent. I hope you can find a way to turn that to good use, in politics or organizing. The world needs young people who think so clearly. Won’t make you much of a living, unless you get yourself elected to Congress, but at least you can have some pride and satisfaction.

          1. super extra

            I appreciate the sentiment in an apology but I’m not sure it’s my generation everyone should be worried about, but those coming after me who have already accepted that the climate change battle will be their life’s work.

            I think the point I was trying to get at in my reply was that it is impossible to engage in any form of society-wide solidarity if those who got theirs (quite a lot of it simply by luck of when and who they were born to) take their identity from their mortgage or house appraisal value. Ok, great, your life’s value apparently was derived from scrimping and saving any denying yourself and oh by the way thanks to historic one-time asset inflation due to hitting the geographic jackpot, your house increased in value by 4000%. I already have to scrimp and save just to survive, telling me to pick a side on whether I pay or earn interest is needlessly cruel. I hope the next housing bust reduces some of your home value so you learn to be nicer?

            But as Yves reminds me above, it’s not just those in the 65-75 age bracket that are unilaterally waging war on my generation, it’s the system optimizing for those with money at the expense of those who don’t, and it just takes one medical emergency or layoff to bring anyone who isn’t already a one percenter down to my level.

            It’s just depressing to come down to these comments and seeing so many people freak out at the idea that having 500k liquid means they have somehow profited inappropriately. Come on, accept your win graciously and don’t demand people also note that somehow you’re a good person for having saved and traded up and hit the house value powerball at some point. That process has gone so far now that it’s just not possible for my generation to continue the game unless the dollar is massively devalued, or house prices are massively devalued, or a little of both.

            1. lambert strether

              As readers now, I don’t think “generation” is a category one can do serious political work with. Marketing, maybe. But generations don’t have political agency. If they did, the 60s (and 70s (and 80s (and 90s (and 00s (and 10s))))) would have turned out very differently.

              1. super extra

                I know Lambert, and I appreciate you and Yves wading into the comments to break up the intergenerational shoving when someone decides to throw a punch. It’s just so hard to hear the nonsense about personal accountability over and over and over again while in the same breath see the justifications and excuses for their own meanness. I realize this isn’t something new to my generation, I just wish people didn’t feel the need to kick others down to make themselves stand up!

            2. scott 2

              The nostalgic era we boomers/early Xers reflect upon was before 1971, when we went off the gold standard and debt was used to drive up the price of everything.

              I assume Super Extra lives in the Bay Area or LA. Prop 13 has turned CA into a feudalistic society of hereditary landowners (my opinion).

  25. Joe Well

    Thank you, thank you, thank you to Yves and the author for tackling the housing crisis.

    On the issue of second homes destroying affordability in communities, let me add North American retirees destroying affordability in communities in other countries, and, in fact, entire other countries.

    New Zealand has banned non-resident foreigners from purchasing existing homes.

    In an historic town in Mexico, San Miguel de Allende, US and Canadian retirees have succeeded in pushing out Mexicans. Many Mexicans claim to have been discriminated there (though it’s hard to weed out real claims of discrimination from anti-Americanism and xenophobia). I mention this town because it’s emblematic of what’s happening in a number of other places in Mexico and Latin America. I would beg any North American thinking of retiring in Latin America to please, please, please, consider your impact on the local people as well as your own healthcare situation (you’re not eligible for the national health service and you risk getting scammed on private care).

  26. Rajesh K

    There is much “wealth” in the world? I doubt it. Are we confusing debt with wealth? I suggest calling in all debts right away. We’ll see how much these houses in Door County (or anywhere else) will cost when the tides go out.

    “Inflation is always and everywhere a monetary phenomenon”.

    In isolation, it might be possible to see the people coughing up 500K as wealthy since they seem to be liquid, but assuming their liquidity came from the stock market, then the whole thing is enabled by a gigantic pile of debt anyway.

    1. Jerry B

      Hmm. My reading of your comment is that you believe that much of wealth is not piles of cash or assets but debt i.e mortgages, car loans, etc. In the example I point to in the post they “cashed out” financial assets to buy the house which is a true example of wealth. I agree that there is a huge issue of Debt in this country. I would recommend David Graeber’s book Debt: the first 5000 years.

      If you are unsure of the amount of actual wealth in the country and world, I would advise doing some research on not income inequality but wealth. But when you do it make sure you are sitting down. NC has covered some things such as Private Equity, the Panama Papers, etc.

      Lastly, in Water Cooler yesterday I made a comment on car prices when Lambert mentioned in the post that the defaults on new car loans are rising. To your point, of course they are rising because too many people are taking out huge auto loans (i.e. debt) to pay for the exorbitant sticker prices for new AND used cars.

    2. Yves Smith Post author

      Net worth is net of debt.

      Median and average net worth by age

      Under 35: Median net worth: $11,100 (average net worth: $76,200).
      35-44: $59,800 ($288,700).
      45-54: $124,200 ($727,500).
      55-64: $187,300 ($1,167,400).
      65-74: $224,100 ($1,066,000).
      75+: $264,800 ($1,067,000).

      Median and average net worth by education

      No high school diploma: Median net worth: $22,800 (average net worth: $157,200).
      High school diploma: $67,100 ($249,600).
      Some college: $66,100 ($340,600).
      College degree: $292,100 ($1,511,100).

      1. JF

        I believe the net wealth of US residents is around one hundred trillion dollars.

        There is a good reason to look at this as a tax base.

        But most of the numbers shown in your comment here would be excluded from a net worth tax regime as it would want the equity in your modest principal residence, cash for precautionary levels for your household, educational support sums and retirement funds up to reasonable levels all to be excluded. Age factors might also apply. Still, a top bracket’s modest rate can progressively move downward to a half percent or one percent floor on amounts above this threshold and contribute a large amount. Allowing the overall revenue system design to shift more away from day to day living as the tax base, where most tax regimes now apply, while also making it possible to make more public goods investments for the society.

        As a proportion of a person’s net worth the very wealthy contribute very very little to the financing of self government. They really should contribute at a higher rate for the benefits they clearly have.

        And even with such a modest net worth tax regime added, as described here, the very wealthy will still contribute, as a percentage of their net worth, much less than most of us.

      2. Rajesh K

        Sure, in an orderly world the above values might be believable, but I believe the real portion of your wealth is the one you can liquidate in a hurry when others are liquidating as well. Or when you need it. If you have it but you can’t deploy it, it’s not yours.

  27. nothing but the truth

    there’s too much money chasing too little assets.

    this is the logical conclusion of paper money.

    1. lambert strether

      Using the words “logical consequence” doesn’t in and of itself create or reveal a logical consequence. Surely you can see this?

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