On the subject of bubbles, California provides a nice object lesson for Australians who refuse to believe home prices can ever fall. “Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to ‘material’ price declines,” according to a Bloomberg recap of a Goldman Sachs report.
California—the land of milk and honey—is an excellent example of the psyche of Americans (although not all Americans are like Californians, thank goodness.) What we mean is that nowhere in the world are expectations for a worry-free, convenience-driven standard of living higher than they are in California.
In California, the difficult jobs like growing food and building things and cleaning toilets have been outsourced to Mexicans—some illegal, some legal. And in California’s division of labour, that has freed everyone else up to become an actor or a real estate agent.
For now, the idea that you can’t actually get rich trading houses with your neighbour refuses to take hold in the psyche of Californians, bro. But like, you know, sooner or later, nature is going to be nature, which means a bust will follow the credit boom.
Still, we admit that we saw our two favourite bumper stickers in California. “Question Reality” was one. The other – seen at the time the Regan administration was secretly and illegally backing the contras in Nicaragua – “US out of North America!”
Markets and Money