Tuesday, September 14, 2010

What "The 25 Most Expensive Homes" Reveal About the U.S. Economy

"The 25 Most Expensive Homes in Hawaii" reflect an economy based on financial speculation whose wealth is concentrated in a parasitic financial sector.

The glossy Mid-Pacific yuppie advert vehicle Honolulu Magazine recently ran a cover story of irresistible real-estate pornography titled "The 25 Most Expensive Homes in Hawaii" that unintentionally revealed the true nature of the U.S. economy.

The homes, valued in the $30 million range, were typically located in exclusive coastline enclaves: no big surprises in either the locations or the bubble-economy valuations.

What might surprise anyone who still clings to the quaint belief that America's great wealth is generated from actually producing goods or services of global value is who owns the vast majority of these villas: investment bankers and hedge fund managers.

A grand total of three of the 25 made their wealth in technology--software, computers, etc. One Japanese multinational (Toyota) made the list (unsurprising, considering Hawaii's decades-long appeal to wealthy Japanese), as did one Japanese female whose source of wealth wasn't identified. There was one artistic outlier, and the rest were all financial parasites: investment bankers, hedge fund managers or other denizens of the speculative FIRE (finance, real estate, insurance) economy which has come to dominate profits and wealth accumulation in the U.S.

In years past, the list would probably have been dominated by people who made fortunes in energy, technology or some innovative business with global reach.While it is likely that robber-barons would have been heavily represented in The Gilded Age (1880s-1890s), at least the businesses represented--railroads, mining, trade, etc.--offered widespread benefits in the real economy to citizens in the form of jobs and new goods, resource and services.

Financial parasites, in contrast, skim fortunes from the real economy. Hedge funds are restricted to the top 2% or so of U.S. households, so the gains skimmed from manipulation and speculation act to further concentrate the already high concentrations of wealth in the U.S.

While it can be argued that "financial services" creates jobs just like technology, railroads, etc., the entire industry is fundamentally parasitic in nature: the credit- real estate bubble revealed that its widely-heralded "innovations" were essentially embezzlements and frauds taken mainstream.

As millions of now-underwater homeowners discovered, the "wealth" created by highly leveraged, debt-based speculative "innovations" was illusory except for the billions of dollars of commissions and fees generated by the churn and stripmining of assets on a global scale.

Beneath the bogus propaganda of "free market capitalism" is an economy in which the real money is skimmed day in and day out without risk or benefit to the real economy. Investment banks generate profits of $100 million a day without interference of mere probability, which would suggest an occasional losing day.

Vast industries practice a highly-refined type of crony capitalism which can be characterized as "Federalized entrepreneurship," in which a revolving-door between captured regulators and goverment managers and private cartels insure a highly profitable "partnership" channels profits to the National Security State contractors, the sickcare cartels (insurance, pharmaceuticals, etc.) and other industries dependent on Federal largesse.

At the top of this foul heap of phony capitalism--in effect, a partnership of the State, a monopoly with exclusive power to collect trillions in taxes and borrow trillions more, and corporate cartels which act as monopoly-capital in their industry--rests the ultimate parasites of the financial "industry": producing nothing but skimmed profits for the Plutocracy and its loyal army of high-caste technocrats, enforcers and factotums.

The $30 million estates in Hawaii are second or third homes. My sources on the Kona Coast report that the Kona airport is congested with private jets, and recent buyers of $10 million+ homes along the Kona Coast of the Big Island are simply adding the homes to their private portfolios of homes to enjoy a few weeks out of the year.

Beneath the real-estate pornography of bloated McMansion estates lies the ugly subtext of what the list reveals about the nature of wealth creation and concentration in the hollowed-out, credit-dependent, financial-speculation dominated U.S. economy.

Those touting the regenerative powers of U.S. "innovation" and the U.S. economy should ponder who can afford $30 million third homes, and what their great wealth has added to the citizenry of the U.S.

If you drive around these enclaves, what you find is a modern Plantation economy of the sort I have described in Survival+ and in previous entries: an economy fundamentally based on extraction and the domination of the State-corporate partnership.

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