More unseen…

June 26, 2009

More unseen destruction

An 8-acre landmark site on Ventura Boulevard that was both an entertainment venue and worship site for a half-century has been foreclosed on, a victim of the recession.
Bank of America seized the property on April 21, after a development company that planned to build a 340-unit condominium and retail project there defaulted on the loan, according to Los Angeles County Assessor’s Office records.

An 8-acre landmark site on Ventura Boulevard that was both an entertainment venue and worship site for a half-century has been foreclosed on, a victim of the recession.

Bank of America seized the property on April 21, after a development company that planned to build a 340-unit condominium and retail project there defaulted on the loan, according to Los Angeles County Assessor’s Office records.

Yes, this is what recessions do.  They clear out the malinvestment.  But what is unseen is what could have been instead.
That building was razed shortly after JPI bought the property in April 2007. However, construction of the condo project never got under way.
“They (JPI) put a very large loan on (the site), graded it and ran out of money,” said a Valley real estate executive familiar with the project who did not want to be identified.
“Ran out of money”.  That I find hard to believe!!!  I thought Uncle Ben was printing like crazy.
But a sales brochure said that the land is shovel ready and that construction can start after minor administrative matters are taken care of.
Condos might not be the only option, either.
“If investors don’t deem this plan as the highest and best use in the current market, there are a number of variations that conform to the current entitlements,” it said.
Well, that’s good news.  It’s “shovel ready”, perfect for “stimulus” funds.  I guess that’s what the “administrative matters” would deal with.
Maybe investors see the value, or lack thereof, in this piece of property and don’t want to sink any more capital into non-productive assets.
Again, what is missing from this article, as well it must, is what was not built, what wealth was not created, by the diversion of capital to projects such as this.  We’ll never know.  Just another sign of the credit riven boom/bust cycle courtesy of our wise overlords at the Fed.  Just another sign of the destruction of policy driven consumerism and over-leveraging.  It’s going to be along time and a painful one too, for the economy to recover.
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The unseen destruction

June 26, 2009

The true measure of unemployment IS NOT the paltry unemployment number which does show 9.4% unemployment.  Yes, this is awful and proof that we’re in very deep recession.  We’re going to be in for a very painful readjustment period.  The real unemployment number we ought to be examining is U6.

This is the measure of:

Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

Currently the U6 is 16.4% and it has almost doubled since a year ago.  This is the unseen destruction.  Years of misallocated resources, malinvestment, and policy driven consumption created a huge bubble, the boom time, when instead of actually creating wealth, we were in the process of destroying it.  Now comes the very rough but very necessary readjustment period when malinvestment is liquidated and capital and labor can be allocated to more desirable ventures.

But don’t expect that anytime soon.  The administration is going full steam ahead on its Keynesian agenda while the fed plays right along.  Massive deficits, artificially low interest rates and monetary expansion are going to only prolong this pain.  And to top it off, Congress is voting on cap and trade and soon will be working on nationalization of health care.  In the works is “consumer protection” legislation and massive new regulation of the financial markets.

The U6 numbers say it all.  Fully 1/6 of the labor force is being underutilized.  As for capacity utilization, this graph is staggering.

tcu

Will it end soon?

This is by far the sharpest downturn in investment in the post WW2 era.  The longer we have interventionist policies, the longer it will last.  So, the answer I guess is quite simple: it’s going to last a very long time.

gdpi


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