Labor Rising: Will Class Identity Finally Matter Again?

That this level of incendiary outrage has seeped into the mainstream media tells us that the bill for America's gluttony of inequality is long overdue.

Two primary trends may be reversing: wage earners--labor--may be finally starting to regain some of the share of Gross Domestic Income (GDI) lost to capital over the past 54 years, and economic class identity that collapsed in favor of individual identity--enabling the siphoning of $149 trillion in GDI from labor to capital since 1970--may be reviving.

The two trends are intertwined: the cultural dominance of identity politics came at the expense of economic class identity, which effectively blinded us as a nation to the multi-decade transfer of wealth from wage earners to owners / managers of capital.

If we are wondering how the bottom 90% have lost ground, we can start with the social-cultural blindness to the collapse of class identity which enabled the dominance of capital politically, economically and socially, as manifested in the rise of globalization and financialization, the tools used to transfer income from labor to capital.

Capital's increasing share of domestic income was not pre-ordained; it was the result of specific policy decisions, starting with globalization's downward pressure on domestic wages. The fancy term for forcing American workers to compete with other workers around the world whose cost of living is a fraction of ours is global wage arbitrage: capital shifted jobs to low-wage regions at will to increase profits at the expense of domestic wages.

This is the fundamental advantage capital has over labor: capital is globally mobile, labor is grounded in a particular place. Yes, workers can move around the world, too, but there are restrictions, both legal and in cost / sacrifice, as the effort and expense required to move from one country to another are significant.

Capital doesn't care about a place or community; that's up to the residents. If capital shifts overseas to lower costs / increase profits, well folks, make do with what's left.

Financialization amplified capital's dominance of the economy, for capital gained tremendous power as credit and leverage expanded capital's scale and reach at the expense of domestic workers and communities.

It's equally important to note that the corporate dominance generated by globalization and financialization also gutted small business and the local enterprises that provide the bulk of the jobs and cohesion in communities.

The RAND study Trends in Income From 1975 to 2018 concluded that capital skimmed $50 trillion from labor from 1975 to 2018. Using data from the Federal Reserve's FRED database (series A4102E1A156NBEA), correspondent Alain M. calculated the actual sum for the period 1970 to 2022 (2022 being the most recent data available) was a staggering $149 trillion: his spreadsheet is available here as a PDF: Employees Share of Gross Domestic Income 1970-2022.

If wage earners' share of Gross Domestic Income had remained at 51% instead of declining to 43%, wage earners would have received an additional $149 trillion over those 52 years. That's roughly $3 trillion a year, which works out to an additional $22,000 annually for America's 134 million full-time workers or an additional $18,000 annually for the nation's entire work force (full-time, part-time, self-employed, gig workers) of 163 million.

No wonder the purchasing power of a day's work has declined to the point many cannot afford to buy a home or start a family or rent an apartment.

Time magazine published a gloves-off summary of the RAND study in September 2020: The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90% -- And That's Made the U.S. Less Secure.

Consider these excerpts from the article:

"There are some who blame the current plight of working Americans on structural changes in the underlying economy--on automation, and especially on globalization. According to this popular narrative, the lower wages of the past 40 years were the unfortunate but necessary price of keeping American businesses competitive in an increasingly cutthroat global market. But in fact, the $50 trillion transfer of wealth the RAND report documents has occurred entirely within the American economy, not between it and its trading partners. No, this upward redistribution of income, wealth, and power wasn't inevitable; it was a choice--a direct result of the trickle-down policies we chose to implement since 1975.

We chose to cut taxes on billionaires and to deregulate the financial industry. We chose to allow CEOs to manipulate share prices through stock buybacks, and to lavishly reward themselves with the proceeds. We chose to permit giant corporations, through mergers and acquisitions, to accumulate the vast monopoly power necessary to dictate both prices charged and wages paid. We chose to erode the minimum wage and the overtime threshold and the bargaining power of labor. For four decades, we chose to elect political leaders who put the material interests of the rich and powerful above those of the American people."

That this level of incendiary outrage has seeped into the mainstream media tells us that the bill for America's gluttony of inequality is long overdue. The pendulum reached an extreme and is now starting to swing back, as evidenced by previously anti-union work forces (VW auto workers, for example) starting to vote in favor of unionization. Trillion-dollar cartels / monopolies--the golden children of capital--are finally facing some pushback from their work forces and anti-trust agencies.

Here is the Federal Reserve chart of wage earners' share of Gross Domestic Income:



Note the basic structure of lower highs and lower lows: labor's share of GDI recovers a bit of ground in "good times"--speculative bubbles and massive federal stimulus--and then reverts to trend once the bubbles pop.

The substitution of identity politics for economic class identity has been catastrophic for the bottom 90% of the American work force and the bottom 90% of American households. Capital can buy political influence to obtain policies that favor capital; the work force has no power other than the cohesion generated by shared identity manifested in cooperative action in pursuit of economic shared interests.

Corporate apologists and PR flacks like to demonize labor organizations as "Marxist" to misdirect us from the reality that labor organizations are necessary counterweights to corporate dominance. Once the counterweights have been stripped out, the system decays to what we have today: a hyper-globalized, hyper-financialized corporatocracy with zero interest in anything beyond maximizing private gains by whatever means are available (cough, doing God's work, Pelosi portfolio, cough). The net result is a failed state geared to serve the interests of the few at the expense of the many.

A pendulum can only reach so far before it reverses and proceeds to the opposite extreme (minus a bit due to friction). Labor, capital and class identity are all starting to swing away from 50+ year extremes that decimated the financial security and share of domestic income of the bottom 90%.

Thank you, Alain M., for generously sharing your analysis of wages share of GDI 1970 - 2022.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Peter A. ($70), for your astoundingly generous contribution to this site -- I am greatly honored by your support and readership.		Thank you, Mark S. ($70), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Walter S. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, John D. ($20), for your much-appreciated generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Read more...

China and the U.S.: What Matters That's Overlooked

Parsing geopolitics is fun but our attention is better directed to the limits and second-order effects of legacy systems in each of the rival states.

Geopolitics, like any conflict, is dramatic: rivals jostle for hegemony on a 3-D chessboard, war threatens, etc. The focus of this drama is on the leaders' calculations and the pieces being moved around the board in the complex battle for hearts, minds, resources and the high ground.

This is the conventional context of history, and so accounts of the rivalry between the Roman Empire and the Persian Empire read like contemporary accounts of the rivalry between China and the U.S.: the actors and scenery changes, but the dramatic plot remains the same.

A less dramatic but closer reading of history tells a different story: imperial decline stems not from external rivalries but from internal limitations. Externalities--plague, drought, invasion--are not causes so much as events which reveal the limits of the empire's internal legacy institutions.

These rigidities can be structural--economic or political--or cultural / social. There are two dynamics in play here:

1. Once solutions are institutionalized, they become legacy systems that focus not on flexibly solving problems but on sustaining and defending the interests of the institution and its insiders. The solution becomes the problem.

2. Whatever is viewed as a solution generates unanticipated second-order effects which the system is ill-equipped to resolve.

There are many examples of these dynamics in both China and the U.S., and indeed, in every nation / polity.

Consider the goal of increasing homeownership, a laudable ideal that the U.S. pursued after World War II by institutionalizing the heretofore unavailable innovation of 30-year fixed-rate mortgages and government-agency backed mortgages (Veteran Administration-backed mortgages for veterans, FHA, etc.).

Once the institutions promoting homeownership became self-sustaining legacy systems, they changed from "solution" to "problem." As homeownership rates reached 65% of American households, the institutional drive to increase homeownership led to the development of subprime mortgages designed for households that did not qualify for conventional mortgages.

To grease the skids, lending standards were stripped to the point of irrelevance, liar loans took center stage and ratings agencies rubber-stamped risky mortgages as low-risk.

The net result of this institutional self-serving inertia was the collapse of subprime securities and the near-collapse of the global financial system as the dominoes of default and obscured risk started falling.

Turning to China, consider this chart of what happens when a one child per family state policy is enforced for three generations:



The policy was institutionalized with a sensible goal of limiting population growth to increase living standards, but without consideration of the second-order effects down the road.

In three generations, there are four grandparents and two parents who are all single children without siblings, uncles or aunts, and a single child who could be tasked not just with caring for two aging parents but four even older grandparents, should they live beyond the ability of their own aging offspring to care for them.

China has acquired the markers of a great power--missions to the moon and Mars, a mighty military and global economic influence--but it lacks a state-funded universal social welfare system that provides a substantial pension and medical care for every retiree regardless of their employment or earnings. This leaves much of the care of China's rapidly aging generations on the shoulders of the third generation of single offspring.

As in other nations, China's birthrate has declined precipitously as the financial pressures on parents mount, especially on young mothers who desire career opportunities equal to those available to young men.

Social welfare programs become increasingly costly and burdensome as populations age. Any state-funded solution will require diverting enormous sums currently spent elsewhere to the care of a large aging cohort.

The sources of brittleness and failure that are overlooked are internal, not external. Parsing geopolitics is fun but our attention is better directed to the limits and second-order effects of legacy systems in each of the rival states.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Peter A. ($70), for your astoundingly generous contribution to this site -- I am greatly honored by your support and readership.		Thank you, Mark S. ($70), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Walter S. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, John D. ($20), for your much-appreciated generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Read more...

The Ghetto-ization of American Life

Behind the facade of normalization, even high-income lifestyles have been ghetto-ized.

Consider the defining characteristics of a ghetto:

1. The residents can't afford to live elsewhere.

2. Everything is a rip-off because options are limited and retailers / service providers know residents have no other choice or must go to extraordinary effort to get better quality or a lower price.

3. Nothing works correctly or efficiently. Things break down and aren't fixed properly. Maintenance is poor to non-existent. Any service requires standing in line or being on hold.

4. Local governance is corrupt and/or incompetent. Residents are viewed as a reliable "vote farm" for the incumbents, even though whatever little they accomplish for the residents doesn't reduce the sources of immiseration.

5. The locale is unsafe. Cars are routinely broken into, there are security bars over windows and gates to entrances, everything not chained down is stolen--and even what is chained down is stolen.

6. There are few viable businesses and numerous empty storefronts.

7. The built environment is ugly: strip malls, used car lots, etc. There are few safe public spaces or parks that are well maintained and inviting.

8. Most of the commerce is corporate-owned outlets; the money doesn't stay in the community.

9. Public transport is minimal and constantly being degraded.

10. They get you coming and going: whatever is available is double in cost, effort and time. Very little is convenient or easy. Services are far away.

11. Residents pay high rates of interest on debt.

12. There are few sources of healthy real food. The residents are unhealthy and self-medicate with a panoply of addictions to alcohol, meds, painkillers, gambling, social media, gaming, celebrity worship, etc.

13. Nobody in authority really cares what the residents experience, as they know the residents are atomized and ground down, incapable of cooperating in an organized fashion, and therefore powerless.

I submit that these defining characteristics of ghettos apply to wide swaths of American life. Ghettos are not limited to urban zones; suburbs and rural locales can qualify as well. The defining zeitgeist of a ghetto is the residents are effectively held hostage by limited options and high costs: public and private-sector monopolies that provide poor quality at high prices.

Daily life is a grind of long waits / commutes, low-quality goods and services, shadow work (work we have to do that we're not paid for that was once done as part of the service we pay for) and unhealthy addictions to distractions and whatever offers a temporary escape from the grind.

We've habituated to being corralled into the immiseration of limited options and high costs; the immiseration and sordid degradation have been normalized into "everyday life." We've lost track of what's been lost to erosion and decay. We sense what's been lost but feel powerless to reverse it. This is the essence of the ghetto-ization of daily life.

Behind the facade of normalization, even high-income lifestyles have been ghetto-ized. But saying this is anathema: either be upbeat, optimistic and positive or remain silent.

What's worse, the ghetto-ization or our inability to recognize it and discuss it openly?

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, A.M.S. ($5), for your very generous contribution to this site -- I am greatly honored by your support and readership.		Thank you, Tristam W. ($5/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, David L. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Jason C. ($7/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

Cities' "Doom Loops" Are Even Worse Than You Imagined

This is why those who understand these dynamics are getting out, even though the city was their home.

A correspondent who prefers to remain anonymous sent me this account of the "doom loop" that is playing out in many American cities. The correspondent makes the case that the Doom Loop is not limited to specific cities, but is a universal dynamic in all US cities due to the core causes of the Doom Loop: financialization and the multi-decade decay of cities' core industrial-economic purpose / mission.

I have edited the text slightly, with the correspondent's approval.

The context of the Doom Loop is the process and politics of this decay are the second-order results of central bank easy money (free fiat). That led to financialization becoming the city's core function and the subsequent loss of the city's previous mission. The people living in cities just haven't gotten the message yet.

As such, there is no reversing the process until the centralization of capital itself is reversed.

The typical media articles on metropolitan "doom loops" make it seem like not every city is headed down the path. Now that financialization does not require a physical presence, every city above a certain size will share the same experience. There will be local variations which impact the trend, such as a potential utility as a large pool of voters (i.e. a vote farm), but the decline is part and parcel of financial 'virtualization.'

It is inevitable.

Even hosting one of the twelve central reserve banks won't save you.

The process when a city loses its purpose but persists due to inertia follows this basic pattern:

1. Corporate consolidation costs the city its financial base as Fortune 100 corporations are sold to conglomerates closer to the centers of finance.

This is one more second-order effect of easy money: global corporations can easily finance the acquisition of multi-billion dollar companies.

2. In the past, cities received huge government subsidies for re-development, but none for ongoing maintenance. All the redevelopment projects looked great at first, but with little funding for maintenance, they've gone downhill and many are now dangerous.

Today, the only redevelopment is done by the billionaire class who make most of their money from (surprise) finance. Once the billionaire loses interest, it's gone, too.

I would rather find myself in a developing-world city than an American downtown, at least there would be people around. Many American downtowns are literally apocalyptic.

3. Major league sports are increasingly an exercise in force protection. It's like going inside a forward firebase in Iraq. People still get shot in the stands from guns fired outside the bubble. Unsurprisingly, some major league teams are exploring space outside the cities despite their stadiums being only 20 years old.

4. When federal agencies build new facilities, they're essentially fortresses with direct entrance/egress from the highway. They add little to nothing to the surrounding economy.

5. Real estate, sales and personal property taxes in cities are typically the highest within the state. As tax revenues decline, cities' political leaders increase business taxes and start floating ideas such as taxing non-profit organizations: a financial death spiral indeed. Should taxes increase, organizations and companies have said they will leave.

6. In the industrial economy, the core purposes of cities were derived from advantageous locations and key transportation assets (first water, then rail, then roads, and later aviation). In the information age, those benefits are diminished or gone. As a result of their transportation advantages, cities became manufacturing and warehousing hubs. Those too are diminished or gone.

7. Cities have lost their core economic purpose and are choking on their high legacy costs. The proposed substitute purposes--entertainment and bourgeois lifestyles--are not true substitutes. Fine dining and secure condos with delivery do not replace actual economic functions.

8. Making matters worse, the upper-middle class doesn't want affordable housing in their enclaves, as it lowers property values. So the workers needed to keep the city functioning can no longer afford to live there. Yes In My Backyard (YIMBY) movements to promote affordable housing are not enough.

9. Much of the politics the media focuses on are a consequence of decline, not a cause, and the net result of all the in-fighting is some version of stasis: all sorts of solutions are proposed, but since none address the core sources of decline or the cities' high legacy costs, they boil down to rearranging deck chairs on the Titanic.

This is why those who understand these dynamics are getting out, even though the city was their home.



Of related interest:: The Real Estate Nightmare Unfolding in Downtown St. Louis: The office district is empty, with boarded up towers, copper thieves and failing retail--even the Panera outlet shut down. The city is desperately trying to reverse the 'doom loop.'

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, A.M.S. ($5), for your very generous contribution to this site -- I am greatly honored by your support and readership.		Thank you, Tristam W. ($5/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, David L. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Jason C. ($7/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

Is the 'Housing Shortage' the Result of Housing-Hoarding by the Wealthy?

Those seeking to buy a house as shelter for their household can't compete with the wealthy seeking assets to snap up and hoard for appreciation.

Longtime readers know I've been addressing housing issues from the start of the blog in 2005. Let's start with the general context of housing in the US, courtesy of the US Census Bureau, which tracks occupancy and the number of housing units nationally: Quarterly Residential Vacancies and Homeownership, 4th Quarter 2023

All housing units 145,967,000

Occupied 131,206,000
Owner 86,220,000 59%
Renter 44,985,000 31%

Vacant 14,761,000 10%

Non-seasonal (i.e. not second homes owned by the wealthy for their recreational use) 11,177,000

Units vacant because they're in the process of being rented or sold:
For rent 3,224,000
For sale only 757,000
Rented or Sold 783,000

Held off Market (occasional use, temporarily occupied, other) 6,414,000

Seasonal (i.e. second homes owned by the wealthy for their recreational use) 3,583,000

TOTAL Held off Market and Seasonal / Recreational: 9,997,000

In summary: there are 14.7 million vacant dwellings in the US, of which 10 million are not available for year-round rentals or sale. Those 10 million dwellings are comparable to the total number of dwellings in entire nations, for example, Australia (11 million housing units, population of 27 million).

There are many complexities not specified or included in these statistics. For example, vacant dwellings located in rural locales with few jobs might be empty because there is little demand due to a declining population. Other dwellings may no longer be habitable without renovation or repair.

On the other side of the equation, non-permitted dwellings (granny flats, etc.) may also be uncounted as those answering Census Bureau questionnaires might hesitate to report units added without official approval. This can include everything from RVs parked alongside homes to converted garages to living rooms partitioned off and rented out as quasi-bedrooms.

The vagarities of self-reported data are potentially major factors in counting short-term vacation rentals, a.k.a. AirBnB / VRBO-type rentals. Data remains sketchy on exactly how many housing units are being "held off the market" as short-term vacation rentals. As of 2023, there were 2,459,260 available vacation rental listings in the U.S., but this may not include informal rentals, rentals listed outside of the major platforms, etc.

The Census Bureau offers several estimates of seasonal units: 3.6 million in the above link, and 4.3 million vacant seasonal units in this post: See a Vacant Home? It May Not be For Sale or Rent. These are traditionally second or third homes of wealthy households. but many such properties are now being offered as short-term vacation rentals for periods when the owners aren't using the property.

What these statistics don't tell us is how many housing units have been snapped up by wealthy households as investments, nominally as "second homes" but solely as safe places to park excess capital / credit, not for recreational use. The wealthy may have joined the rush to cash in on the short-term vacation rentals boom, but they don't need positive cash flow to afford the costs of ownership; the Airbnb rental income was mostly to defray the costs of ownership.

Too Many Rich People Bought Airbnbs. Now They're Sitting Empty

In other words, one factor in the "housing shortage" is the pressure on the wealthiest households to find places to park their excess capital and exploit their low-cost lines of credit. This can be understood as a second-order effect of the Federal Reserve's policy of inflating asset bubbles in which 90% of the gains flowed to the top 10% households. This new wealth could then be tapped to buy real estate, a long-favored asset class of the wealthy that has risen to new heights as the wealthy compete with other wealthy households to snap up housing.

There's not much in the pockets of the bottom 50% to compete with the top 5% for housing: we can expand this to say there isn't enough in the pockets of the bottom 90% to compete with the top 10% who collected 90% of the gains of the Fed's credit-asset bubbles:



We can see how much rental and sales prices have risen in the past few years: charts are courtesy of the US Census Bureau.

Median asking rent for vacant rental units, nationally:



Median asking sales price for vacant for sale units, nationally:



Meanwhile, housing units per capita is hitting record highs. This doesn't support the claim that there aren't enough housing units; it supports the idea that housing has been hoarded as an asset class, concentrated in the hands of those seeking vacation rental profits or appreciation on housing left purposefully vacant because renting it out is a hassle.



Would a couple million housing units entering the year-round rental market relieve some of the pressure pushing rents into orbit? Basic supply-and-demand suggests the answer is yes.

What happens when central bank manipulations of credit and interest rates reward the few with 90% of the gains generated by policies seeking to goose "the wealth effect"? The entire economy becomes distorted by the speculative frenzy to snap up assets that will appreciate as the Fed's bubbles continue expanding.

Those seeking to buy a house as shelter for their household can't compete with the wealthy seeking assets to snap up and hoard for appreciation. Those seeking to rent a dwelling are up against corporate hoarders of homes such as Blackrock, which owns 7% of all rentals in the US, and wealthy households pulling dwellings out of the year-round rental market to feast on the profits generated by revenge-spending vacationers.

Would a deep recession incentivize an increase in the number of occupants per dwelling and a corresponding decline in demand for rentals? Would a collapse of The Everything Bubble prompt some selling of hoarded housing? As painful as these might be, these dynamics would correct the destabilizing distortions wrought by the Fed's easy-money bubble blowing and concentration of wealth in the hands of the few at the expense of the many.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Suzanne S. ($70), for your magnificantly generous subscription to this site -- I am greatly honored by your steadfast support and readership.		Thank you, Herb S. ($150), for your outrageously generous subscription to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Mike S. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Sebastian S. ($70), for your superbly generous subscription to this site -- I am greatly honored by your steadfast support and readership.

Read more...