Drive less, import less, watch dollars weaken -- that’s us
Big changes that were ahead are happening now
| All the indicators are connected. We trim, blend, and append five 2008 articles: (1) “Gas prices rattle Americans” by Judy Keen and Paul Overberg of USA Today in early May; (2) “March trade deficit drops by bigger-than-expected amount” by AP’s Martin Crutsinger, May 9; (3) “Peruvians ditch the dollar, move savings to soles" by Reuters’ Dana Ford, April 30; (4) “US median home price falls a record 7.7% in first quarter” by USAToday's Stephanie Armour in mid May; and (5) “Plan with real promise for poorer home buyers” by the editors of the Canberra Times, May 4. |
by Jeffery J. Smith, May 2008
USA Today: Record high gas prices are prompting Americans to drive less for the first time in nearly three decade. February was the fourth consecutive month in which miles driven in the USA fell. There hasn't been a similar decline since 1979, when shortages created long lines at pumps.The average price of a gallon of gas nationwide, around $4, is the highest ever, adjusted for inflation. Eight in 10 say they doubt today's high prices are temporary. It's the first time such a large majority sees pricey gas as a long-term problem.
JJS: Compact cities and mass transit are the answer -- two transformations that follow from efficient land use. People use land without waste where they pay land dues or land taxes to their government. Those dues can fund upgrading the transit system. Less time lost in traffic means less need for oil.
AP: The U.S. trade “deficit” narrowed sharply in March as demand for imports fell by the largest amount since the last recession was ending, 2001 December. The decline, which pushed imports down to $206.7 billion, was led by a 5.9% decrease in America's foreign oil bill. The amount of petroleum fell as the average price for crude oil jumped to an all-time high.
Exports in March, which have been flying out of the country lately, slowed to $148.5 billion, still the second highest level on record but down 1.7% from the all-time high set in February. Sales of commercial airliners, cars, computers and machinery were all down.
JJS: Americans sell more to foreigners since their currencies buy more dollars than they used to. So fewer foreigners keep their savings in dollars. If all those expatriated dollars were repatriated, inflation in the States could spin out of control.
Reuters: In Peru, about half of home loans are made in dollars, and Peruvians use greenbacks to buy their morning coffee. But after years of trailing the dollar, Peru’s sol now makes up nearly 52% of all bank deposits, up from 39% a year ago.
In decades past, rampant inflation tore away at the buying power of deposits in the country's currency, driving Peruvians to buy dollars as a hedge against inflation. Rather than control his spending, President Alan Garcia in the 1980s froze and then seized dollar bank accounts, telling Peruvians to withdraw funds in the country's currency.
Garcia's successors liberalized the banking system and the dollarization process resumed apace, driving the amount of dollars in the banking system to more than 80% at its peak.
This decade, as inflation ebbed and with their economy booming and the dollar weakening, Peruvians have been slowly gaining confidence in the sol. The sol has rallied as much as 14% against the dollar over the last 12 months as Garcia, who returned to office in 2006, has stuck to policies favored by investors. The sol trades at around 2.85 per dollar.
Peru's economy grows about 9% a year. In the 12 months through March, inflation hit 5.5%, above last year's 4%, raising the prospect of a slower de-dollarization pace.
JJS: The value of the US dollar is not a matter of economics so much as of politics; as long as politicians spend the US deeper into debt, investors remain wary of the dollar. On the other hand, the value of American land, primarily under homes, is less a matter of politics, more of economics; once its price has risen so high, sucking so much money out of so many pockets, then the rest of the economy must slow, and home+site prices must fall, and fall far enough for the economy to reignite into the next 18-year business cycle.
USA Today: Median home prices -- the point at which half cost more and half cost less -- fell broadly in the first quarter of the year, spreading to such cities as Dallas, Seattle and Raleigh, NC. Falling in 100 of the 149 metro areas, the percentage -- 67% -- was the highest since Realtors began keeping such records in 1979. Nationally, the median price tumbled 7.7%, from $212,600 in the first quarter of 2007 to $196,300 in Q1 of this year. That was also the biggest percentage drop on record.
JJS: Home+site prices must keep falling all the way back down to affordable again, which is good news. Meanwhile, the governors of Australia’s Capitol Territory (ACT) have figured out how to make homes affordable for residents.
C. Times editor: A family can concentrate their resources on a house and defer making payments on the land part to a time when their situation has stabilized and they are better able to repay. Over the life-cycle of the home, they may not make net savings (because the land has to be paid for, at its then-current value sooner or later) but they can defer the obligation until when they can afford it or when they sell.
The founders of the ACT had a dream that the city could fund its own development by leasing its land (all of which was public). Politicians on both sides liked the ideas of American economist Henry George, who argued that the community should share in increasing land values caused by city development. Indeed, leasing land or taxing its value could obviate the need for any other taxes.
---------------------
Jeffery J. Smith runs the Forum on Geonomics.
|
Also see: Collecting The Cost of Gas Guzzling
Focus on International Trade
Land Distribution Raises Urban Planning Questions |
| Email this article | Sign up for free Progress Report updates via email |
What are your views? Share your opinions with The Progress Report:
| Page One | Page Two | Archive |
| Discussion Room | Letters | What's Geoism? |
