Re: PK on GDP surge - what could a socialist say ?

[Jurriaan Bendien <bendien@xxxxxxxxxxxx>]

Okay Doug,

> A major prop to consumption in the U.S. over the last 2-3 years has
> been home equity withdrawals - borrowing against the appreciated
> value of owner-occupied housing. Since 68% of U.S. households own
> their dwellings, your definition of "propertied" would have to be
> rather broad.

Same in Holland, same in Australasia, same in many European countries. In
the 1990s you had the hot air bubble and now they're breeding. But now you
have to explain why people would do that, under what conditions they would
borrow against inflated property values. Presumably, they would do that only
if for example they were sure that they had job security, or if they gained
a rise in pay, and so on. And that cuts out a lot of people already, because
we know there is a lot of job insecurity. Next, house prices do not rise
across the board at the same level of increase, they would rise fast only in
specific areas of the USA and specific neighbourhoods. Again that cuts out a
lot of people. Next, you could look at household income and expenditure data
and then you would see still more people wouldn't be able to engage in
equity borrowing. Krugman isn't just talking about that, however, he is
talking about people building new houses and then you have to ask who is
building houses, who can afford it ?

I said previously that GDP includes the rental value of owner occupied
housing. This is to be precise the IMPUTED rental value of owner occupied
housing, strictly speaking a fictitious entry (because no "production" is
involved here) which would of course boost the GDP figure if you have a
housing boom, in addition to the increased turnover in the construction
industry and its suppliers as shown by the input-output tables. If your
housing stock goes up and home ownership increases, you have more imputed
rental value as well. Many consumer durables bought in the USA in the
consumption boom would not be produced in the USA and therefore would not
add jobs in the USA either.

The ridiculous thing in New Zealand is that people try to engage in rentier
imperialism when large chunks of the country are owned by foreigners and the
country is massively in the hock to foreigners. But you have to admire them
for getting away with it, that's pretty good trading. In the words of a NZ
popsong by Blam Blam Blam, "there is no depression in New Zealand, there are
no sheep on our farms, there's no depression in New Zealand, we can all keep
perfectly calm".

J.