America's Race to the Bottom

MSNBC is a joke. Here is real world news, from the front lines. Trucking saw substantial loss of freight, wages fell up to 50%, there are plenty of parking spots at the places you could not dream finding a parking spot after 6 pm only 3 years ago, corporate bitches stopped (almost) bitching about driver's shortages, all but 1 (for entire USA) company driving schools were closed. You see, the beauty of America is that it knows how to sweep its dirt (and desperates) under the rug, you just don't see them from the gated communities.

Europe don't play funny unemployment and GDP numbers the way US government does. Being unemployed in Germany and USA - two BIG differences. I don't remember the last year when unemployment was less than 10% in Germany, but it was long, long time ago.

Here is how trucking companies go out of business in good ole USA, stranding hundreds of drivers around the country.


http://www.tulsaworld.com/news/article.aspx?subjectid=11&articleid=20091223_54_A1_Amanwi223508
 
read-only said:
Take a careful look at these two current news reports and note that things ARE getting better all across the world and that employment in the U.S. *IS* right on the verge of rising.
I guess "on the verge" of rising does not flatly contradict the facts, as "rising" did in your earlier post.

Employment - in absolute numbers of people holding full time jobs - is still falling in the US. Wages have of course been falling for decades.

I have become accustomed to seeing economists say "the economy" was doing well, when the economic circumstances of most Americans were deteriorating, but anyone claiming we are now recovering, things are getting better right now for most Americans, is a bit out of touch.
 
Also, didn't a number of countries spend billions and billions to boost the economy to where it's at?

It should be noted that AU seems to still be going strong. I wonder why?
 
... If (a dream, I know) everyone spent all their available money of food, then didn't go to work but instead organised a national strike, and refused to accept money or spend any more of it, what would all that paper be worth? How rich would a millionaire be if nobody recognised paper money?...
Two questions:
(1) The paper money would not be worth much if people did not work, but neither would the society. I.e. the truck drivers do not deliver any food to the stores, the baker makes no bread, the trains deliver no coal or oil to the power plants, very little functions without electricity, etc. - a collapse of society far worse than any depression is what happens if no one works. It would be like the old Roman story* where all parts of the body went on strike as they seemed to only server the stomach. (legs went to get food and water, hands delivered it to the mouth, teeth chewed it etc.) Your "all stop work" would have the same effect: death of the society.

(2) Probably less than 0.1% of the rich's wealth is in paper money. It is invested in ownership of items, and their value change typically more than ten times more each day. They would not even notice a 0.1% loss of the value thay have in paper money. If you want to make the very rich poor, you must end private ownership. AFAIK, no society has lasted very long without private ownership.

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*I read it in my high school Latin class. Do they still even teach Latin in high school?
 
... The trend are, it is 2012 when bottom will fall out (BillyT - 2014). ...
My 31Oct2014 is end of a “window,” not a date for collapse. I had been predicting a US collapse for several years and then Barron Max, pointed that out (with the sarcastic post that it had not happened yet) and demanded I tell when. So I set up a 6 year wide window (31 Oct 2008 to 31 Oct 2014)* for the run on the dollar to happen with US and EU sinking rapidly (a few months at most) into deep long-lasting depression after the dollar had lost most of its value in the run. (It is hard to have a prosperous economy, especially if you have foolishly build "suburban infrastructure," when you cannot pay for enough oil to allow private cars to have gasoline.)

Some think that if worse comes to worse, the military might of the US will simply take the oil needed, but they are ignoring how much hate for the US was developed under GWB and the fact that a couple of terrorists can blow up an oil pipe line in a dark night. That is one important lesson that should have been learned in Iraq. Even with US occupation, the oil production fell to about 1/3 the pre invasion level. Marines cannot make oil flow if many hate American so much that they will gladly die to stop the flow of oil. Iran can easily take out the oil ports of Saudi Arabia or sink a few tankers in the strait of Hormuze and stop other tankers from passing thru it. Etc.
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*In several posts I have suggested that I thought I could safely bring the end of the window at least a year closer, but being conservative (and liking to have my predictions always confirmed, I have not.) If I were to pick a most probably date (assuming Obama is not assassinated etc.) then I would suggest October or November of 2012 as then the presidential election polls will be forecasting his defeat.** – He is just delaying the depression with Keynesian stimulation greater than the world has ever seen before. This huge increase in US debt under Obama will be a major, highly-publicized, part of the Republican election campaign. That will scare some of the minor holders of US paper, (like Kuwait or S. Korea) and they will dump all they have on the market, (for gold and/or Yuan) trying to be the first out and thus the least hurt.

** He is very smart so probably will not even be the Democratic candidate (as he will know the run on the dollar is coming soon.) He will say he has served his country and needs to spend time with his family, etc.
 
... Several of you are starting to sound just like Billy T - the only difference is that he WANTS to see the U.S. fail. ...
That is very false and insulting. I have two daughters and four grandchildren. All are living in the USA. At my stage in life, their welfare is my main concern. I just hope I can get them all out before the shit really hits the fan. - Social unrest when poor neighborhood food stores do not have food and hungry, armed groups come to the suburbs looking for it in basements.

More than five years ago I thought there might still be hope to avoid this disaster, if only college students would cease taking courses that lead to carriers as stock brokers / lawyers / doctors etc. - big money - and instead study more of the harder sciences as the US had already lost the technology leadership to Asia. (Back then already very little mass market electronics was still produced in the US - the US lacked the technology skills - not due to cheaper labor. For example, the US was three generation behind in technology of flat display production and complex IC chip fabrication etc.) I.e. I thought there was still a chance that at least scientific leadership / innovation could still be preserved for the US, if only the US students were willing to work harder with fewer prospects of future financial rewards.

So I wrote the book you can read about at www.darkvisitor.com - it is a scary story of an approaching cosmic disaster, told as if it were fact. (It could be.) Idea was to make a few money seeking students at least want to check out the physics to see it could be true that their world was about to end. - I was hoping a few might become interested in physics. (There is a huge amount of physics hidden in the story - but never conventionally taught - just numerically used. E.g. Keppler's three laws are illustrated in calculations, but never even named as that might scare off my target reader, who would never knowingly open a book filled with physics. Black holes and about five other items that could be the approaching 2.2. solar mass "dark visitor" are descibed and discussed etc. How the Earth's spin controls climate, make wind come from the west in US is explained in simple terms, etc.

The "dark visitor" (cannot see it coming as it reflects no light.) misses Earth by 12 times the distance to the sun, but the gravitational impulse makes Earth's orbit slightly more eccentric. – That throws the Northern Hemisphere into a permanent sever ice age (mile thick ice over DC in less than 100 years, etc.) All the world’s ports are useless in a decade as sea level falls etc.

In addition to writing this book, I have actively described what will happen to the US and EU if we keep the focus on making money instead of technical innovations.

SUMMARY: I have spent a significant fraction of my retirement years trying to avoid what I now think is inevitable. What have you done? - Answer: Assumed everything is and always will be a happy ending for the USA. You must know little of the history of prior civilizations and the fact that their period of domance is growing ever shorter.
 
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Billy T, are you aware how risky & short-lived is an average sci-engineering career in USA? As it is, there are way, way more graduates in science and engineering than there are jobs (requiring that education). Jobs pertinent to graduate degrees are especially hard to come by. Do you know that >50% of MIT graduates in sci&eng are employed by investment&consulting firms, they would never do any engineering. On the other hand, MIT graduates knowing nothing about real life engineering are affecting investment flow$.

But let's look at your proposition which really solve nothing in the long term. Let's imagine sci&engineering boom in USA (or even entire world), all the fruits of efficiency improvements is appropriated by investor class = less good paying meaningful jobs = more silly&unessential low paid service jobs to absorb victims of efficiency boost - more unemployment - more waste and brainwashing to "create" demand for all those new products&services for the victims of sci&eng. Lastly, all the apparent boosts in efficiency and living "ease" brought by sci&eng are paid for with future generation's resources and energy. Boost of efficiency = boost of material&energy consumption and waste.

I would take much more than flooding already flooded sci&eng. job market with even more suckers desperate for a job. First, a society in which owning class appropriates all the financial fruits of efficiency improvements (bought with future' generation resources&misery) will be hard to maintain in the near future (without reversing to a police state, death squads and Brazilian like favelas possibly behind barbed wire) due to enormous quantity of resource, energy, waste&ecological damage it takes to sustain it. Second, compound interest formula and financial systems&debt pyramids built around it are out of this world.
 
Billy T, are you aware how risky & short-lived is an average sci-engineering career in USA? As it is, there are way, way more graduates in science and engineering than there are jobs (requiring that education). Jobs pertinent to graduate degrees are especially hard to come by. Do you know that >50% of MIT graduates in sci&eng are employed by investment&consulting firms, they would never do any engineering. On the other hand, MIT graduates knowing nothing about real life engineering are affecting investment flow$.

But let's look at your proposition which really solve nothing in the long term. Let's imagine sci&engineering boom in USA (or even entire world), all the fruits of efficiency improvements is appropriated by investor class = less good paying meaningful jobs = more silly&unessential low paid service jobs to absorb victims of efficiency boost - more unemployment - more waste and brainwashing to "create" demand for all those new products&services for the victims of sci&eng. Lastly, all the apparent boosts in efficiency and living "ease" brought by sci&eng are paid for with future generation's resources and energy. Boost of efficiency = boost of material&energy consumption and waste.

I would take much more than flooding already flooded sci&eng. job market with even more suckers desperate for a job. First, a society in which owning class appropriates all the financial fruits of efficiency improvements (bought with future' generation resources&misery) will be hard to maintain in the near future (without reversing to a police state, death squads and Brazilian like favelas possibly behind barbed wire) due to enormous quantity of resource, energy, waste&ecological damage it takes to sustain it. Second, compound interest formula and financial systems&debt pyramids built around it are out of this world.


In other words, if factors A, B, C lead to crisis, let's triple the quantities of A, B, C to fight the crisis. Seems like a plan.
 
Here is another assumption that could bite us in the butt. You see, our imports dropped from $1.6 Trillion to $1.1 Trillion from Sep 2008 to Sep 2009. That is a fact. Now, that is the good news.

But it is calm before the storm. Here is why. Most of the imports are from Asia as we do not have the money or credit to buy any more due to high unemployment. The Asian stocks are getting hammered because their production and profit is in the toilet. So, those companies will be aggresive in dumping their products in the world market. Good for consumers who have money. But our export would suffer due to severe competition and subsidies.

That is exactly what happened. We exported $990.6 Billion thru Sep 2008 while only $762.7 Billion thru Sep 2009.

The economist said that one GM plant closure in Ohio that lay off 2100 will have an indirect impact of 120,000 job loss. So, think about how much job loss the Asians are having as our imports dropped (estimated) >$700 Billion in 2009?

Then think about our drop in exports of $228 Billion in the first 9 months and estimated $350 Billion for 2009 is doing to our job market.

Bottom Line: Unless there is a coordinated plan to revive the world economy, it is continue to spiral down as the industrial foundation is extremely shaky while we are playing politics.

It is like two football teams that have AIDS...how long can they sustain unless the underlying problems are resolved.
 
To dixonmassy: I don’t dispute what you state in post 29.

My call is really more for students to be interested in understanding the physics world they live in – a life-long and rewarding task. I am well aware that the US society especially is organized to encourage and reward them to try to understand how to make money.

An education in the hard sciences is a good way to develop logical thought processes (but may not do as much for “people skills” etc.) That is why business CEOs etc. are hiring them – they have an HR department to do the “people skills,” but need logical thinkers too.

For example, you can credit (or blame) mainly high energy physicists for doing the complex structuring of the CDOs (I think that was the name.) – The slicing and dicing of many mortgages into complex packages with different risk bands, (Owners of the lowest risk band got their lower returns first etc.) which now makes it nearly impossible to evaluate their worth. (I.e. makes them toxic trash).

I think the extreme emphasis on making money of the US culture does not lead to a satisfying life or even a stable society. – Mainly leads to a lot of broken marriages, immoral behavior, and nervous break downs, etc. – Making lots of money is not a very good goal in life, except it bring business to the shrinks. My call is not to have a society that is highly technical, (but it should at least be able to compete with those that are). It is more to have a society that values education, and not just as a tool for making money. That is one of the things I admire most about the Jewish culture. “Rabi” means “teacher.”

BTW, your post 28 is duplicated and extended by 29. Please delete 28. – I can but think it best if you do it while you still can.
Billy ... Lastly, all the apparent boosts in efficiency and living "ease" brought by sci&eng are paid for with future generation's resources and energy. Boost of efficiency = boost of material&energy consumption and waste. ...
I tend to disagree with that. For example, the kerosene lamp saved a lot of sperm whales. The compact florescent lamp replacing the electric light bulbs is saving energy and tungsten.

The main problem with "progress", IMHO, is that people are persuaded that they simply must have the newest cell phone or iPods etc. and nothing is worth repairing as it is old. The growing masses can only be feed by the green revolution. I see technology as a saving factor, but again it needs to be used correctly to give our grandchildren a less polluted, more efficient world consuming less. That it does not is not technology's fault - the fault belongs more to Madison Avenue and business men creating false needs for the sake of their profits.
 
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Housing, especially big homes in the suburbs with foolish energy requirements (even just getting to and from them) for the coming era of costly energy are helping speed "the race to the bottom." Here are three facts from Bloomberg:

(1) “…Currently, 6.5 million households are either in default or at least one payment behind on their mortgages…
(2) The number of borrowers with so-called negative equity reached 10.7 million, or 23 percent, at the end of the third quarter {2009} …
(3) The median price fell 12 percent in 2009 to $173,500, compared with a 9.5 percent drop in 2008…”

From: http://www.bloomberg.com/apps/news?pid=20603037&sid=a6RsJycboEUE

Billy T comments:
From (1) & (2) above we conclude that 10.7-6.5=4.2 million homeowners are still paying their mortgage on time, even though the value of their house is LESS than the unpaid mortgage balance. – In most cases, they must still have hope their home value will recover, increase, but in view of item (3) one has to wonder why they do not just turn the keys over to the bank and walk away. I.e. item (3) shows not only that home prices, on average are declining, but that the rate of decline is accelerating.

Much of the accelerating decline in home prices is due to the increasing rate of foreclosures. That is throwing more vacant houses on the market. In fact, there is more than a year’s worth of new home building coming on the market annually from foreclosures. And that is only the tip of the iceberg:

There is a much larger “shadow inventory” of homes for sale than the inventory of homes now listed for sale. I.e. many owners want to sell but cannot afford to offer their home at a priced that would give it any chance of selling. For example, those 4.2 million “under water” owners still paying their monthly mortgage bills cannot sell their home for a price that will pay off their mortgage, so they do not even list it for sale. The shadow inventory forms a “cap” on home price recovery. Gary Shilling*, probably the foremost expert on housing, expects that the medium home price must drop at least 10% more before marginal potential buyers will buy at the rate homes are being built and foreclosed. Only then will it be possible for home prices to stop falling.

The current $8000 government gift to first time home buyers was supposed to expire at end of November 2009, but was extended several months. It adds to the government’s growing debt and cannot be a permanent aid to the housing industry and price support for houses. When it ends, I estimate that will cause home prices to fall another 10% before the number of buyers is equal to the number of sellers, without further lowering of home “asking prices.”

A decade ago, many were buying homes and even apartment buildings as investment. Almost every one considered their owned home to be a good investment. Many were buying second homes for vacations and rental when not using it themselves. Many bought bigger, more expensive homes than they needed, as that was a “bigger investment” expected to gain them more than a smaller house would. Thus the US now has a large inventory of “too big” houses. Except for a few with special location (view of the sea etc.) they must lose more than 50% of their peak value in order to sell.

SUMMARY: Instead of the great investment home ownership was expected to be, it has turned out to be one of the worse investments you could make. Many painfully now understand this. In the future, people will only buy as much house as they need (if they even buy, instead of rent) There is a few years old thread discussing buying vs. renting. (If I can easily find it, I will give link.) Most posters favored buying instead of renting as the home was both an investment and gave a tax deduction on the mortgage interest. ("Renting was just throwing your money away") – They know better now. – Renting was the better choice.

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* Watch him discuss the problem in 3 minute video called: "Housing Inventory Still a Problem" at: http://www.moneyshow.com/video/video.asp?wid=4994&t=3&scode=015362

P.S. If 10.7 is 23 % of owned homes, then there are 46.52 million owned homes in the US. Assuming typically 4 people per home, that is 186 million Americans who live in "owned homes", but quite a few may not be the owner of the house they live in. Thus, if there are 300 million Americans, at least 114 million rent or are homeless.

As a WAG, I think the number of renters is now about the same as the number of homeowners living in the home they own. Does any one know?

If not yet true, it soon will be because of two factors: growing number of home foreclosures & "moving back in with mom & dad" - I.e. prior owners of foreclosed home are becoming zero (or low) rent paying "renters." They have lost their status as owners. Also "move back in with mom & dad" is especially common for recent graduates, who can not find a job.
 
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News:

The US economy crushed expectations by growing at a 5.7% clip in the fourth quarter of 2009, but even as Wall Street rallied on the news there are plenty of warning signs of a slower pace ahead.
 
SUMMARY: Instead of the great investment home ownership was expected to be, it has turned out to be one of the worse investments you could make. Many painfully now understand this. In the future, people will only buy as much house as they need (if they even buy, instead of rent) There is a few years old thread discussing buying vs. renting. (If I can easily find it, I will give link.) Most posters favored buying instead of renting as the home was both an investment and gave a tax deduction on the mortgage interest. ("Renting was just throwing your money away") – They know better now. – Renting was the better choice.

Absolutely and positively Incorrect. Renting was better ONLY for those who could truly not afford to buy!! They are the ones that led to the bubble busting. Some simply didn't realize their limitations while others (similarly) allowed themselves to be sucked into something they could not even come close to affording in the first place.

For an example of the other side of the truth, I and many others I know, paid off our house loans YEARS ago and owe nothing on them. We have NO reason to want to sell them because we are happy here and intend to stay - therefore declining values have NO effect on us whatsoever. And had we rented instead, we would have been throwing money down a hole for all those years and would STILL be doing so even today - while having NOTHING at all to show for all that wasted cash/effort.
 
News:

The US economy crushed expectations by growing at a 5.7% clip in the fourth quarter of 2009, but even as Wall Street rallied on the news there are plenty of warning signs of a slower pace ahead.

PRECISELY what I've been saying here for some time. We ARE coming out of it and will continue to do so. It will still take a LOT of time to fully recover - but eat your words, doom-and-gloom sayers - we certainly ARE on our way back!!
 
News:
Japan's Prices, Wages Continue Decline
World’s second biggest economy struggled to shake off combination of falling prices and wages that worsened in December and threatens to hamstring recovery

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This is interesting because we imported $145 Billion of stuff in 2007 while the import dropped to $139 Billion in 2008 and still dropping like a rock in 2009 ($67 Billion thru Sep.)

I bet, the reason Japan is having problem is because, China is back filling all their export in the cheap. It will be interesting to see what they are going to do. The Japanese thought it will take China till 2030 to be a formidable competitor. Oh..well...
 
The United States is in open competition with the same countries from which we buy our goods and finance our government. These countries supply our consumption while simultaneously competing fiercely against our companies in international markets. Nations like India, Japan, and China, along with trade blocs like the European Union, rail against the U.S. when we use “protectionism” because they do not want to have their unfettered access to our market tampered with.

Other countries, like China and Japan, protect their companies by putting limits and restrictions on the amount of American-made goods flowing into the markets. The United States puts up no such regulations, and is thus flooded with foreign-made goods.

NAFTA, and other “free trade” agreements, favor the foreign producers. We are told by the WTO and the EU that we cannot and should not protect our own economy. Through “free trade” the U.S. must open itself to all foreign interests.

Our government has eroded its own regulations regarding capital infusions, mergers and acquisitions, and foreign-takeovers. To make matters worse, most successful American companies are for sale on an open stock market. As a result the United States has lost thousands of companies to foreign takeovers in the past 30 years, and stands to lose even more as the economic crisis deepens.

The same cannot be said of other countries, where takeovers are closely regulated and major industrial champions rarely – if ever – get purchased by an interest overseas.

More: http://www.economyincrisis.org/content/why-our-economy-collapsing
 
{post33}... The US economy crushed expectations by growing at a 5.7% clip in the fourth quarter of 2009, but even as Wall Street rallied on the news there are plenty of warning signs of a slower pace ahead.
Yes. Here is "Roubini POV" on that 5.7%:

"... Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010*, he said.

“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”
{Billy T insert: me too, but that is an understatement of 2011/12's bad prospects, IMHO}

Roubini said while the world’s largest economy won’t relapse into recession, unemployment will rise from the current 10 percent, posing social and political challenges. “It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said. ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aqLMEUObhysc&pos=1

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* Billy T bets 4Q10 GDP growth will be closer to ZERO than 1.5. There are too many "financial chickens" coming home to roost by the end of 2010.

And for balance, here is the Read-Only POV (from post 35):
"... We ARE coming out of it and will continue to do so. It will still take a LOT of time to fully recover - but eat your words, doom-and-gloom sayers - we certainly ARE on our way back!! ..."

Billy T comment: This seems to be only Read-Only's opinion as is lacking any facts or analysis such as Roubini's facts about inventory building (does not continue) and the stimulus effect (does not continue) as the cause of the 5.7% The lack of continuation of the real causes of the 5.7% gain is why Roubini and I think the "recovery" is at best the center peak of a W-shaped recession (or the precursor of my predicted depression before end of 2014). I would be glad to read some facts / analysis that supports Read-Only's opinion.
 
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Absolutely and positively Incorrect. Renting was better ONLY for those who could truly not afford to buy!! They are the ones that led to the bubble busting. Some simply didn't realize their limitations while others (similarly) allowed themselves to be sucked into something they could not even come close to affording in the first place.

For an example of the other side of the truth, I and many others I know, paid off our house loans YEARS ago and owe nothing on them. We have NO reason to want to sell them because we are happy here and intend to stay - therefore declining values have NO effect on us whatsoever. And had we rented instead, we would have been throwing money down a hole for all those years and would STILL be doing so even today - while having NOTHING at all to show for all that wasted cash/effort.
I agree if you bought back before the housing bubble, say before 2005, and have paid off your mortgage you have positive equity in your house, but 23% of all owners have negative equity in their owned house (I.e. are "under water" - have lost more than 100% of their equity}

Also the renter who did not invest the money saved by renting at least in CDs etc. is a loser too, I agree. But he was renting because the monthly cost was less than the mortgage monthly payment. That difference would be his growing (by compounding as well as monthly deposits) positive equity.

I am not speaking of the renter who can only afford to rent. I am speaking of the person who could chose in say 2005 to buy or to rent. I.e. the guy who by renting invested the monthly savings he gained by renting. Also note that over a period of say 10 or more years, the young first time buyer (or renter as I am only speaking of those with a choice) typically has increasing needs. For example if initially single and 10 years later father of three kids, as a renter he can start small and move to bigger apartments as needed. The buyer can buy small house too initially and then bigger ones as the need increases, but typically due to real estate agent fees, transfer taxes, etc. give up at least 10, more typically 15% of the sale's price, where as the moving to bigger apartment renter may pay $200 to moving van company if he moves part of his stuff himself (Small items like clothes, books, plates etc.)

SUMMARY: Your "Absolutely and positively Incorrect." IS AN UNSUPPORTED ASSERTION. At least try to refute some of the saving and capital growth the "renter by choice" gains over the home buyer.
 
SUMMARY: Your "Absolutely and positively Incorrect." IS AN UNSUPPORTED ASSERTION. At least try to refute some of the saving and capital growth the "renter by choice" gains over the home buyer.

Very easy to do. You are completely IGNORING the point that equity in our homes doesn't matter to us at all. We do not intend to sell. And as to you gains in capital growth I say Phooey. What I and the rest of have saved by not throwing away money on rent FAR exceeds anything that conservative investments could have produced.

Also, as our families have grown, many have done the same thing I did - add to our houses rather than going through the sell/upgrade route.

Everything is FAR form the simplistic black-and-white stance you're trying to sell here - there are other options and we chose some of them.
 
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