Of course I wish that Americans will become more loving and tolerant toward one another in this new year’s time of renewal. But given the ongoing toxicity of our nation’s (and state’s) political environment, that hope — and it’s inherent optimism — may be unrealistic. Similarly, the reality of our current plight as human beings in a deteriorating world, and particularly for Americans in a consume-centric spiral of materialistic dependency, is a looming reality that cares not for optimistic platitudes. One day we Americans must confront the consequences of avoiding hard discussions of glaring issues in the name of optimism, even as we focused on each others’ negatives (“specks in their eyes” Matthew 7:5).
We Blue, Red, and non-binary-Party Americans share some common environmental, economic, and social problems that are aggravated by our tribal infighting. These problems are inextricably intertwined, but at this juncture they are bound tightly to our national financial health, which is precarious at best. Allow me to explain.
As a college student, I undertook an internship in 1986 with a local attorney in Connecticut. I earned credits, and was trained in title searching. I then worked as a title searcher around Connecticut through my next three years in law school, working for several different law firms. I had a bird’s-eye view of the real estate market, and I saw that real estate prices were spiking at astronomical rates: houses I searched that sold for $60,000 in 1985 might resale for $100,000 in 1988 or 1989. I calculated at one point that if such a house continued to appreciate at the same rate, it would sell for $1 million in another 20 or 30 years.
Then it all tanked. By the early 1990’s, with a law practice (in partnership with that attorney with whom I’d interned), I was regularly court-appointed as a Committee for the sale of real estate in foreclosure proceedings. The S&L Crisis was in full swing, and the real estate market crashed: concurrently, new federal regulations of environmental waste (including “Superfund” legislation) led investors to shun commercial properties. 10,000-square-foot (or larger) commercial buildings sold at foreclosure sales for a pittance; sometimes a few thousand dollars, where the underlying mortgage might have been $300-500,000.
Fast forward to 2007-8, where we had seen another resurgent real estate market that bubbled and popped. But the causes were quite different. Consider what a house is “worth.” The popular (and accurate) answer is “what a willing buyer will pay and a willing seller will accept.” This oversimplifies a reality in our modern world of borrowing — consumers base what they can “pay” not on the price but on the monthly payment, which is a function of principal and interest. Interest rates on home mortgages in the 1980’s reached into the mid-teens. When interest rates plummeted in the early 2000’s, the monthly cost of carrying a loan did also. Falling interest rates largely contributed to the hikes in what people would pay for a home, and rapid price rises fueled speculation and overreaching, predatory lending practices, and other greediness.
Now let’s consider our current plight. Record low unemployment numbers and a sky-high (though frighteningly volatile) stock market mask the growing menace of our national debt, which will at some point impact interest rates adversely and undermine the U.S. dollar. In a consumer economy with a fiat currency, those debt numbers actually matter. Consumer confidence (optimism?) may be an indicator of future spending and corporate growth, but so also is debt burden. If mortgage rates rise to 9%, what will that do to the true cost (monthly payment) for the homebuyer — and how devastatingly depressing would that be on prices? If 9% sounds unimaginable, dear reader, then you must be young — the national average mortgage rate in the U.S. was 16.64% in 1981 and 16.04% in 1982, and did not drop below 9% until 1992.
Meanwhile, states and municipalities, buoyed by a false sense of wealth as home prices rose due to extremely low borrowing rates, increased budgets steadily, and taxes accordingly. Buying a small home in most states (especially here in Vermont, with some of the highest property tax rates in the nation!) now means basically taking on a permanent additional mortgage that will always go up and can never be paid off — real estate is becoming a necessary liability, not an American Dream.
The truth of the matter is that we Americans have not licked our collective addiction to debt. It’s like a disease, especially when government catches it. We have not sufficiently corrected our banking system after the 2007-8 financial crisis. Our national military budget now exceeds $600 billion annually, but our current deficit (for this year) exceeds that — which is to say, we are putting more than our entire annual federal military budget on account for future generations. And because we have been doing this for decades, that entire S&L Crisis debt is still unpaid, as is some hundreds of billions for the 2007-8 financial implosion — all on the tab. Our accumulated federal debt approaches $22 trillion (about 104% of GDP), which equals roughly 37 years of $600-billion military budgets, and is estimated to equal $179,000 per taxpayer (usdebtclock.org).
I am about to become a grandfather, and I do not wish to leave this problem to my grandson and the “young people” to repair, simply because I fear being called pessimistic at the New Year. Nope, I want readers to acknowledge these deep problems and so come together in support and preparedness (community) rather than be drawn into the political and social strife that paralyzes our nation. I hope that in 2020 we Vermonters will be at the forefront of those who foresaw, and prepared, for increasing economic hardship caused by massive federal government deficits and bloated state and local government budgets. France is in turmoil, international borders are being dissolved, and wealth disparity, inflation, and debt appear to be our future. All this while we “Vermonters” purchase most of our food from desiccated California instead of growing (or buying) our own. A healthy local agriculture is our vitally important future; much more so than most people realize. I predict that I will address that in detail in an article tomorrow.
Previously published on 12/28/2018 in The Newport Daily Express.