> -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > Behalf Of Nick Arnett > Sent: Monday, December 01, 2008 10:34 AM > To: Killer Bs (David Brin et al) Discussion > Subject: Re: Wal-Mart is evil, why it must be eradicated > > On Mon, Dec 1, 2008 at 7:52 AM, Dan M <[EMAIL PROTECTED]> wrote: > > > > > It's rarely as simple as portrayed in economics 10 > > > Of course not. > > For the reason you pointed out later, this doesn't apply. In fact, that's > exactly what I was pointing out -- supply and demand for oil change so > slowly that huge short-term price swings can't be explained by supply and > demand, so some other forces must be regulating it, to the detriment of > nearly everybody.
The reasons I pointed out later are dependant on supply and demand. If immediate demand exceeds available supply, the law of demand means that prices will rise until demand falls to meet the prices. > Your reminders to me of inelasticity were on point, I think. Prices > obviously can more easily go non-linear when supply and demand are > inelastic. I guess that leaves the question of how to figure out if the > price response was rational with regard to supply and demand, or was > influenced significantly by non-market forces. But that begs the question > of whether or not derivatives and such are market forces, whether or not > information was equally available to all, etc. Well, I've been around the oil patch for over 25 years, and have, from time to time, been able to discuss the question of future prices with folks who have been privy to the best understanding of some of the biggest non-governmental players in the field. It is clear to me that these players have a very hard time predicting future prices. For example, the rise in prices over the last 10 years can be traced, mostly, to the rise of emerging market demand and the self destruction of oil production potential in countries such as Iran and Venezuela, and the effects of the long term civil unrest in Iraq (as well as the far more decayed pre-war oil infrastructure in Iraq than expected). Of these causes, the decline of Venezuelan production on the supply side and the rise of Chinese demand stand out, with the rise in Chinese demand seen as the largest unpredicted factor. If one looks at the total failure of the five big investment banking houses, as well as the rating and insurance companies to anticipate the bursting of the housing bubble, I think one would see that these folks failed miserably to predict the future. I'm not saying that insider trading doesn't exist, but the big players in both oil and finance have been too wrong for one to reasonably suppose that they had inside information. Rather, knowing what happened, I'd argue that the investment bankers had inside misinformation. :-) > Having said all that, it seems that such price fluctuations are so > disruptive that no matter what causes them, it would be in our society's > interest to figure out a market-friendly means of moderating them. Maybe > that's not true if they are driven entirely by inelasticity, but I sure > would like to see a thorough analysis of that question. OPEC is trying now, and they are probably the only people with a shot at it. I agree that wild fluctuations are in no one's best interest, it leads to wasted money...but there is no means of regulating demand by the wide variety of countries in the world. > > The housing bubble was partially due to cash with no place to go. But, > > much > > of the excess in housing prices was deliberately caused by homeowners' > > votes > > against affordable housing in places like California. Why do you think > > that > > prices for comparable housing in LA are so much more than Houston or > > Dallas? > > > You have more space. ;-) Well, there is a bit of truth to that, but not enough to explain anything but the prices in the exurbs. I was sent a link (which I can't find now, sorry) of a comparison of the change in price of two downtown condos in Dallas and LA. Given the locations, and equal prices at the start, and given the faster rise in the DFW population, one would think a downtown condo would appreciate more in the city that was growing faster. But, it was the LA condo that rose more in price, far more. > When did we vote against affordable housing? No, it was actually done in a lot of little ways. In this particular example, someone saw the rise in LA prices and wanted to build a high rise condo in the neighborhood of the LA condo in question. The had a location where some 50 some year old 2 story apartments were located. After years of effort, they gave up when the 2 story apartments were declared historical landmarks. There was nothing remarkable about them. Rather, the board that was voted in by local land owners was strongly influenced by those landowners desire to keep housing prices rising. So, they found ways to stop new housing from being built. This works for the short and medium term, but it is setting up a long term disaster. With a house that costs 200k in Houston running 4m in Silicon Valley, a newly hired engineer needs to either live in a shack in Calf. and make twice as much as he would in the Houston area or make 10x as much and push the limits on % of salary going to housing (30% is the standard # IIRC), or get one of those mortgages that depend on prices always rising for her to finance her new house. Clearly, the last was chosen, with the housing debacle we now see. If we stop sub-prime lending companies like HP will need to migrate engineering to places like the Compaq facility in Houston. If they don't, then they will lose out to companies that do move to Texas and other low price states. 2 million dollar homes should be for folks who make at least half a million a year. Thus, I'm guessing that there is a lot more drop in the Calf. market yet to be seen. I realize it's far prettier out there than it is here. But, after a while, the games behind the rise in home prices have to fade and either people allow new housing that is not as aesthetic as the present housing to be built, or folks will have to leave the LA and the SF area like they left they left the Rust Belt 25-30 years ago. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
