Economic depression, and the response of the planning community

[Uptowngirl]

This is food for thought in terms of a new economic depression, and echos what I've been hearing from academic economists lately (and this was somewhat echoed on MSNBC yesterday too)

http://www.cnbc.com/id/48193471

“When we broke the link between money and gold, this removed all constraints on credit creation. This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it has already, and if credit begins to contract, there’s a very real danger that we will collapse into a new Great Depression,” he argued.

“If this credit bubble pops, the depression could be so severe that I don’t think our civilization could survive it.”

“The increase in government debt is making total debt grow, otherwise we would already have collapsed in to a debt-deflation death spiral. This creates great perils, but also tremendous opportunities.”

Duncan argues that governments in the developed world should borrow “massive” amounts of money at the current low interest rates to invest in new technologies like renewable energy and genetic engineering.

“Even if this is wasted, at least we could enjoy this civilization for another ten years before it collapses,” he said.

His views counter those of economists who believe that governments should focus on cutting their debt, particularly where repayments on that debt are threatening to reach unsustainable levels, like in Greece

The question being, if things are this dire right now how does the planning community and citizens generally respond. I think its clear that everything isn't going to say business as usual indefinitely.

[Jelly Roll]

Originally Posted by Uptowngirl

This is food for thought in terms of a new economic depression, and echos what I've been hearing from academic economists lately (and this was somewhat echoed on MSNBC yesterday too)

http://www.cnbc.com/id/48193471





The question being, if things are this dire right now how does the planning community and citizens generally respond. I think its clear that everything isn't going to say business as usual indefinitely.

If the US goes the same path as last time then the recession of 2008 will be similiar to the great panic of 1907. If the time table is the same as that cycle this time then look for another great depression in the year 2028-2031 range.

The thing that I do not understand is why people always compare 2008 to the great depression when it had much more in common with what happened in 1907. Now that the JOBS ACT has repealed some of the laws put in place from the securities act of 1933 I would not be shocked if we have another great depression 10-20 years from now. I actually somewhat expect it as the current 18-25 generation will be the prime consumers and we have a lot less wealth as compared to prior generations at the same stage.

[MolsonExport]

the response here in the great (depressed) city of London Ontario has been to build 'em as quickly as possible, collect the development fees, and fuck the incumbents. So sorry we are making the city into more of a donut than it was before. Greenfield developments and Dumbcentres, all the way.

[mello]

There isn't really much that the "planning community" can do at this point. We obviously need monetary reform. Allowing Central Banks and other large institutions to continue to create money out of thin air that is instantly debt is unsustainable. Andrew Jackson, Jefferson, and Lincoln all knew this. Why don't we print our own debt free currency similar to Lincoln's "Greenbacks". This is such a no brainer but the Banksters will never allow it. They rape us for trillions every year and we just sit back and take it... Very sad

[Uptowngirl]

In terms of history, history may repeat itself but its never a mirror of the past.
I took James Carville's political policy on the economy class at Tulane and many of our guest lecturers 2 years ago echoed what is being said in this article.

Our economy is dependent on credit, credit cannot continue to grow when interest payments make paying the debt down or even maintaining the debt is impossible.

When/if that goes away what effect will that have on infrastructure, energy supply chains, retail and life as it is orchestrated in America today?

[Jelly Roll]

Originally Posted by Uptowngirl

In terms of history, history may repeat itself but its never a mirror of the past.
I took James Carville's political policy on the economy class at Tulane and many of our guest lecturers 2 years ago echoed what is being said in this article.

Our economy is dependent on credit, credit cannot continue to grow when interest payments make paying the debt down or even maintaining the debt is impossible.

When/if that goes away what effect will that have on infrastructure, energy supply chains, retail and life as it is orchestrated in America today?

Well, first off the United States does not have a problem making its payments for the debt obligations that is has. It currently has one of the lowest tax revenue to gdp ratios in the developed world (26.9%). If we look at the US total debt versus our tax revenues a healthy tax revenue to debt ratio will be equal or less the 4 times one years total revenue. The US GDP in 2011 was $15.094 trillion and tax revenues were roughly $4.06 trillion with roughly $2.67 trillion being federal tax revenues or about $8,500 per person. The current amount of public debt is $11.04 trillion and our total debt is $15.85 trillion with roughly half being held by foreign investors. (5.1 trillion) These number do illustrate that the debt is something to be concerned about but given the low tax rates and considering how much of this debt has been added over the past 4 years at low interest rates I do not think it is as bad as many make it out to be.

Now if we move from public debt to private debt I again think that there is a different problem at work. The amount of credit that is out there is very large but most places are not lending it out. The premise of the article you posted is that the bad risk is taking on the loans while the good risk is staying on the sidelines. From my experience working with banks over the past 2 years that is not the case. The average credit score for FHA financing was 700 last year. For a conventional loan the credit score was in the 730 range. Yes, some places are making loans to people with bad credit history but they are in the minority.

I also want to note that the type of debt that people currently has is very different today as opposed to 4-5 years ago when this whole mess started. People have been paying down credit cards over that time period and restructing the debt to have lower interest rates.

Now as to your question of how all of this debt will impact the lives of Americans going forward it will really depend on how the elected leaders decide to govern over the next 4 years. If taxes get raised then the debt problem will start to naturally correct itself if the politicians use the added revenue to pay down the debt like in the 1990s. If taxes get lowered then expect to see a very violent and sudden collapse of the system. In 1945 the total debt to gdp ration was around 112% and the top tax rate was in the 70-90% of income range. As the debt was paid down and the tax rate lowered the country entered an economic boom. Something to think about is that overall personal taxes are at roughly the same levels as 1950. Effective corporate tax rates have dropped from roughly 30% in the 1950s to roughly 10% today. In that same time period we have seen a dramatic shift from smaller employers to corporate employers.

[Uptowngirl]

Well another gentleman who was director of the OMB in the 80s was on NBC proper and he said you can expect a dire recession starting particularly near the end of the year...partly brought on by a new credit crunch, and the debt ceiling limit will hit.

Either way these are just extensions of what I've been hearing for the past year. Shocking that it is making its way into the national news at this point, but issues like these have the potential to dramatically shape the future of planning, and how most Americans live today.

[Jelly Roll]

Originally Posted by Uptowngirl

Either way these are just extensions of what I've been hearing for the past year. Shocking that it is making its way into the national news at this point, but issues like these have the potential to dramatically shape the future of planning, and how most Americans live today.

What changes do you think Americans will make?

I think there have been a few very big changes that have already happened.
One is young adults are living with their parents as opposed to moving out on their own. I think this has happened for a couple of reasons. The first is the lack of jobs for young people and the second is the size of the housing stock that is being shared. Living with your parents when it is three or four people sharing a 2,000 to 3,500 sf house is not that big of an inconvience and everyone still have plenty of space. I believe that this trend will continue in the future for suburban populations especially.

I am also wondering if car ownership will be impacted. The amount of gas consumed has been dropping as people drive less and technology increases. If we assume that more people will have multiple generations living per housing unit I think we might see less car per capita as more people will probably share them.

I have not really decided if cities or the suburbs will do better if a full on depression hits this country to the point that people can not even afford to buy food. I mean many suburbs still have a fairly big agriculture economy tied to them as opposed to the urban centers which are very much dependant on services. I think roughly 25% of NYC's revenue comes from the banking sector. If it collapses like you think it will the city is going to be in for a world of hurt as opposed to a place like the upper part of Bucks County, PA an ex-burb of NYC and Philly which still has a substantial farming industry.

My point I guess is that each location is going to be impacted differently based on what exactly would be collasping to cause the depression. If you have to grow your own food because it is so bad that the supply chains have completely evaporated then many people might get a lot of utility out of the 2 acre lots that their houses sit on. Do I really think that it will come to that? Hell, no.

[brickell]

Originally Posted by Uptowngirl

Well another gentleman who was director of the OMB in the 80s was on NBC proper and he said you can expect a dire recession starting particularly near the end of the year...partly brought on by a new credit crunch, and the debt ceiling limit will hit.

Are you suggesting that they should plan for shrinkage? Or just stop planning for so much growth? Plan for more tent cities and ghettos?

[Centropolis]

i think certain quarters are going to positively respond in a "cultural fashion" to the deluge of pent up big old world processes.

there will and are other kinds of big, ugly, very old world style reactions, as well.

[Uptowngirl]

Originally Posted by brickell

Are you suggesting that they should plan for shrinkage? Or just stop planning for so much growth? Plan for more tent cities and ghettos?

I'm asking how will suburbia react? What about companies that are outside of the city proper on sprawling green campuses? I'm not even really addressing an energy crunch per se just a loss of liquidity in the day to day lives of many Americans.
And if that is sustained over a very long period of time...

[Jelly Roll]

Originally Posted by Uptowngirl

I'm asking how will suburbia react? What about companies that are outside of the city proper on sprawling green campuses? I'm not even really addressing an energy crunch per se just a loss of liquidity in the day to day lives of many Americans.
And if that is sustained over a very long period of time...

From a housing aspect the loss of liquidity already happened. The change in lending practices from pre-2007 to post-2007 meant that many people were eliminated as potential buyers in the housing market. Sale prices then dropped 30-40% and new construction also dropped dramatically, coming to a complete stop in some areas.

Most suburban muncipalities responded to this by cutting the number of employees that are on staff and by raising taxes. I can only speak to the NJ market but the other dramatic shift that took place was the types of projects that are now being financed. Most of the new housing that is being built is attached townhouses located along rail lines or express bus stops that go to the rail lines or the urban centers in the region.

As for planning most of the land around here that is undeveloped is active farmland that has approvals for subdivisions to be built on them. Since the housing crash it is more profitable to keep the active farms going and not build new houses on the land. At the present the highest and best use for the land is farming.

I think the people that will suffer the most from American consumers lack of liquidity is Europe and China. Europe is already in a recession and China has seen a steady decline in growth. If you take out the biggest consumer market in the world then there is nobody for them to sell their goods to.

[Wizened Variations]

The question, to me, is not so much "why" but "how" will cities and metro areas have to deal with less available credit, a static or declining tax base, crumbling infrastructure, meeting a payroll that has not declined in step with declining revenues, pension costs, paying their portion of federally mandated programs, etc.

Obviously, how administration has been done, how planning has been done, and, how projects of all kinds are built is going to have to change, while at the same time city, metro, county and state governments must maintain at least the appearance of independence from power brokers.

Planning just cannot take as much money to do as before. Spending "$100,000,000 before the first shovel full of dirt is turned over" just is not affordable for all but the largest cities (and in most cases such money just adds to the mediocrity of the final 'design.')

Environmental impact statements must be able to be completed quickly, public input and discussion must be made quickly and recommendations sincerely considered, and, then projects built efficiently and quickly.

For example, the job of metro wide planning is not to just employ huge staffs making designs, completing reports, and, shuffling all sorts of electronic paper: no, concrete and steel also must be laid, contractors selected, constuction supervised, etc., all within a shorter period of time than now.

In addition, private parties must be financially encouraged to have a different relationship with their publics on a city, metro, country, state, and, federal level. "Public need" needs to be made "profitable."

IMO, the US is starting to go through changes in how planning on all levels is done that are as radical a change from the recent past as the impact of the internet since 1990 has been until 2012. How does the Nation build (or repair existing) efficient, useful, well built infrastructural systems in an era with less real money?

[llamaorama]

I'll bet the real reaction by the planning community to economic depression is that the planning staff will get laid off

What happens next, meh

[coyotetrickster]

Originally Posted by llamaorama

I'll bet the real reaction by the planning community to economic depression is that the planning staff will get laid off

What happens next, meh

Probably, the best, most accurate response ever....

[mhays]

Originally Posted by Wizened Variations

The question, to me, is not so much "why" but "how" will cities and metro areas have to deal with less available credit, a static or declining tax base, crumbling infrastructure, meeting a payroll that has not declined in step with declining revenues, pension costs, paying their portion of federally mandated programs, etc.

Obviously, how administration has been done, how planning has been done, and, how projects of all kinds are built is going to have to change, while at the same time city, metro, county and state governments must maintain at least the appearance of independence from power brokers.

Planning just cannot take as much money to do as before. Spending "$100,000,000 before the first shovel full of dirt is turned over" just is not affordable for all but the largest cities (and in most cases such money just adds to the mediocrity of the final 'design.')

Environmental impact statements must be able to be completed quickly, public input and discussion must be made quickly and recommendations sincerely considered, and, then projects built efficiently and quickly.

For example, the job of metro wide planning is not to just employ huge staffs making designs, completing reports, and, shuffling all sorts of electronic paper: no, concrete and steel also must be laid, contractors selected, constuction supervised, etc., all within a shorter period of time than now.

IMO, the US is starting to go through changes in how planning on all levels is done that are as radical a change from the recent past as the impact of the internet since 1990 has been until 2012. How does the Nation build (or repair existing) efficient, useful, well built infrastructural systems in an era with less real money?

If you're talking about some of the extreme examples you could cut the study time. But design takes massive detail that costs money, most of which happens long after the pretty pictures come out. Soil needs to be tested. Materials have to be fabricated. Funding and any kind of progress always have a chicken/egg relationship.

[Centropolis]

good thing i dropped out of that urban planning program.