Case-Shiller Index Monitors Continued Fall

The first quarter of 2009 saw a continued, dramatic slide in home prices. From cnnmoney.com:

The S&P/Case-Shiller National Home Price index, a bellwether of real-estate market direction, plunged a record 19.1% during the quarter compared with the first three months of 2008. That followed an 18.2% drop last quarter.

The Case-Shiller 20-city index dropped 18.7% year-over-year, also a record. It fell 18.5% during the last three months of 2008. This index has plummeted 32.2% from its July 2006 peak and has fallen 32 straight months.

Phoenix and Las Vegas continue to be hammered.

Two cities have now have fallen more than 50% from their peak prices: Phoenix is down 53% since June 2006 and Las Vegas is off 50.4% from its August 2006 high. Dallas prices suffered the smallest loss from peak, just 11.1% since June 2007.

Official press release from S&P/Case-Shiller with in depth charts and graphs can be found here.

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The Housing Boom and Bust

Interview by Tomas Sowell on reasononline. Sowell's latest book is The Housing Boom and Bust,
"a plain-English explanation of how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust".

reason: What sort of reactions should the federal government have to the current situation?

Sowell: First, the government should not try to artificially keep up housing prices. The tremendous irony is that the very politicians who for years talked of affordable housing are fighting to keep housing prices from falling. How does housing become more affordable except by keeping prices down? They really have no interest in having housing become affordable by means other than their largesse.

reason: Do you think they need to be doing anything to ease the woes of people in foreclosure?

Sowell: Not at all. Foreclosure is not something that happens to you like being struck by lightning. Foreclosure is the end result of things people have done that they need to stop doing in the future. And the market can take care of that. California is one of those states where we’ve seen a drastic reduction in fancy no-money-down mortgages and all kinds of creative financing; we’ve seen those things drop sharply within just a couple of years as housing prices fell and foreclosures rose, as long as the government isn’t there to prop them up.

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Is California Too Big To Fail?

Who is up next for bailouts? How about California?

Preliminary returns on Tuesday night show that voters soundly rejected ballot measures calling for higher taxes, meaning that the not-so-Golden State's politicians are likely to take hat in hand and head to Washington begging for a bailout.

Republican Gov. Arnold Schwarzenegger floated that idea months ago, as did Assembly Speaker Karen Bass, a Democrat. Schwarzenegger's visit to the White House on Tuesday surely didn't harm its prospects.

California does have enough cash to survive through June 30, but the state controller estimated in March that another $10.6 billion would be necessary to last the summer.

Where does this stop? How many other states have budget troubles? If you want to have government spending, you must have sufficient tax receipts to pay for it. The moral hazard of a federal bailout of individual states is staggering. Why would any state balance its budget?

An article in Tuesday's Bond Buyer newspaper reported, citing congressional sources, that the U.S. Treasury and Federal Reserve are considering loan guarantees and "other assistance" to state governments. A House of Representatives committee is holding a hearing Thursday on a bill to provide federal guarantees; House Speaker Nancy Pelosi, a San Francisco Democrat, is in a position to make that happen.

Now, it's true that California's fiscal woes are serious, but they're the result of politicians' poor decisions over many years. No matter how it's concealed, a bailout could jeopardize the nation's AAA credit rating - and invite 49 other governors to queue up outside the Treasury building. (The incentive is perverse: The worse shape your state is in, the more cash you get from the Feds.)

This is just a symptom of our greater national problems. We are spending more money than we make on nearly every personal and governmental level. This cannot continue.

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Jurisprudence

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U.S. Electrical Grid

Here's detailed interactive graphical representation of the U.S. electrical power grid from NPR. It shows the grid and power generation facilities, as well as wind and solar potential.

The U.S. electric grid is a complex network of independently owned and operated power plants and transmission lines. Aging infrastructure, combined with a rise in domestic electricity consumption, has forced experts to critically examine the status and health of the nation's electrical systems.

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Tragedy of the Commons and the Road to Serfdom

In this passage, Hayek touches upon the concept of the Tragedy of the Commons and negative externalities. He acknowledges a limitation of a pure capitalist system, yet posits that this fact is not reason enough to discard of the system outright. He then later describes that these responsibilites would fall to the state: "In no system that could be rationally defended would the state just do nothing. An effective competitive system needs an intellegently designed and continuously adusted legal framework as much as any other."

There are, undoubted fields where no legal arrangements can create the main condition on which the usefulness of the system of competition and private property depends: namely, that the owner benefits from all the useful services rendered by his property and suffers for all the damages caused to others by its use. Where, for example, it is impractical to make the enjoyment of certain services dependent on the payment of a price, competition will not produce the services; and the price system becomes similarly ineffective when the damage caused to others by certain uses of property cannot be effectively charged to the owner of that property. In all these instances there is a divergence between the items which enter into private calculation and those which affect social welfare; and, whenever this divergence becomes important some other method other than competition may have to be found to supply the services in question. Thus neither the provision of signposts on the roads nor, in most circumstances, that of the roads themselves can be paid for by every individual user. Nor can certain harmful effects of deforestation, of some methods of farming, or of smoke and noise of factories be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances, we must find some substitute for the regulation by the price mechanism. But the fact that we have to resort to the substitution of direct regulation by authority where the conditions for the proper working of competition cannot be created does not prove that we should suppress competition where it can be made to function.

Excerpt from The Road to Serfdom - Friedrich von Hayek, 1944

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The Defense of Hank Rearden

No, I do not want my attitude to be misunderstood. I shall be glad to state it for the record. I am in full agreement with the facts of everything said about me in the newspapers - with the facts, but not with the evaluation. I work for nothing but my own profit - which I make by selling a product they need to men who are willing and able to buy it. I do not produce it for their benefit at the expense of mine, and they do not buy it for my benefit at the expense of theirs; I do not sacrifice my interests to them nor do they sacrifice theirs to me; we deal as equals by mutual consent to mutual advantage - and I am proud of every penny that I have earned in this manner. I am rich and I am proud of every penny I own. I made my money by my own effort, in free exchange and through the voluntary consent of every man I dealt with - voluntary consent of those who employed me when I started, the voluntary consent of those who work for me now, the voluntary consent of those who buy my product.

I shall answer all the questions you are afraid to ask me openly. Do I wish to pay my workers more than their services are worth to me? I do not. Do I wish to sell my product for less than my customers are willing to pay me? I do not. Do I wish to sell it at a loss or give it away? I do not. If this is evil, do whatever you please about me, according to whatever standards you hold. These are mine. I am earning my own living, as every honest man must. I refuse to accept as guilt the fact of my own existence and the fact that I must work in order to support it. I refuse to accept as guilt the fact that I am able to do it better than most people - the fact that my work is of greater value than the work of my neighbours and that more men are willing to pay me. I refuse to apologise for my ability - I refuse to apologise for my success - I refuse to apologise for my money. If this is evil, make the most of it. If this is what the public finds harmful to its interests, let the public destroy me.

This is my code - and I will accept no other. I could say to you that I have done more good for my fellow men than you can ever hope to accomplish - but I will not say it, because I do not seek the good of others as a sanction for my right to exist, nor do I seek the good of others as a sanction for my right to exist, nor do I recognise the good of others as a justification for their seizure of my property or their destruction of my life. I will not say that the good of others was the purpose of my work - my own good was my purpose, and I despise the man who surrenders his. I could say to you that you do not serve the public good - that nobody's good can be achieved at the price of human sacrifices - that when you violate the rights of one man, you have violated the right of all, and a public of rightless creatures is doomed to destruction. I could say to you that you will and can achieve nothing but universal devastation - as any looter must, when he runs out of victims. I could say it, but I won't. It is not your particular policy that I challenge, but your moral premise. If it were true that men could achieve their good by means of turning some men into sacrificial animals, and I were asked to immolate myself for the sake of creatures who wanted to survive at the price of my blood, if I were asked to serve the interests of society apart from, above and against my own - I would refuse. I would reject it as the most contemptible evil, I would fight it with every power I possess, I would fight the whole of mankind, if one minute were all I could last before I were murdered, I would fight in the full confidence of the justice of my battle and of a living being's right to exist. Let there be no misunderstanding about me. If it is now the belief of my fellow men, who call themselves the public, that their good requires victims, then I say: The public good be damned, I will have no part of it!

Excerpt from Atlas Shrugged - Ayn Rand
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Pirate Party Vies for EU Seat

Sweden's Pirate Party (Piratpartiet) - whose platform consists mainly of abolishing copyright and patent law - appears to be gaining enough support to claim a seat on the European Parliament.

Hey, I'm all for burning a few mp3s here and there, but this really is amazing to me. Perhaps it is their candor that is surprising...most politicians wish to legalize stealing without your knowledge. These guys put it right out there for everyone to see. I wonder if their followers have thought through the consequences of the proposals, after all the free movies and music have lost their allure. Perhaps they simply do not care.

I believe in property and I believe in intellectual property. A world without property laws would have dangerous seas to navigate, indeed.

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