Tag: california
TRANSPARENT CALIFORNIA
If you want to understand why our states are headed for bankruptcy, check out this California website that reveals the compensation and pensions of every government union drone in the state from highest to lowest.
‘Transparent California’ Web site offers useful pay info
There’s not much California taxpayers can do about the outrageous pay and benefit levels enjoyed by the state’s public employees. But there’s an increasing amount of information out there that lets them see what these levels are. Here’s a great new database from “Transparent California.” It’s sure to induce high blood pressure, but have at it any way.
THIS DROUGHT IS MAKING ME THIRSTY
Who needs food anyway? We’ve always got pretzels.
The Drought Goes From Bad To Catastrophic
Submitted by Tyler Durden on 08/01/2014 21:00 -0400
As we previously commented, when scientists start using phrases such as “the worst drought” and “as bad as you can imagine” to describe what is going on in the western half of the country, you know that things are bad. However, in recent weeks the dreadful situation in California has gone from bad to catastrophic as the U.S. Drought Monitor reported that more than half of the state is now in experiencing ‘exceptional’ drought, the most severe category available. And most of the state – 81% – currently has one of the two most intense levels of drought.
h/t @TimOBrien
While California’s problems are particularly severe, that state is not alone in experiencing significant drought right now. There are wide swaths of moderate to severe drought stretching from Oregon to Texas, with problems impacting numerous states west of the Mississippi River.
Some of the most severe droughts outside of California are impacting large pockets in Oklahoma, Texas and, particularly, Nevada, where more than half of the state is currently experiencing one of the two most intense drought conditions:
* * *
Most people just assume that this drought will be temporary, but experts tell us that there have been “megadroughts” throughout history in the western half of the United States that have lasted for more than 100 years.
If we have entered one of those eras, it is going to fundamentally change life in America.
And the frightening thing is that much of the rest of the world is dealing with water scarcity issues right now as well. In fact, North America is actually in better shape than much of Africa and Asia. For much more on this, please see my previous article entitled “25 Shocking Facts About The Earth’s Dwindling Water Resources“.
Without plenty of fresh water, modern civilization is not possible.
And right now, the western United States and much of the rest of the world is starting to come to grips with the fact that we could be facing some very serious water shortages in the years ahead.
BAD TEACHERS
Guest Post from Mike Shedlock
Bad Day for Bad Teachers, Good Day for Kids
Summary: In 1954, the U.S. Supreme Court issued the landmark decision Brown v. Board of Education, which struck down racially segregated schools because, the court said, they were inherently unequal and they unjustly harmed poor and minority children. Last month, a California court cited Brown v. Board as it struck down multiple state laws, passed at the behest of teachers’ unions, which the court said unjustly protected incompetent teachers and unconscionably harmed children, especially the least fortunate.
In a landmark decision that sent shock waves through the educational establishment, Los Angeles Superior Court Judge Rolf Treu ruled last month that California’s teacher tenure laws unconstitutionally deprive students of their guarantee to an education and to equal rights. “The evidence is compelling,” Judge Treu wrote. “Indeed, it shocks the conscience.”
In Vergara v. California, nine students sued the State of California, claiming that ineffective teachers were disproportionately placed in schools with large numbers of “minority” and low-income students. Judge Treu agreed and quoted the U.S. Supreme Court’s 1954 Brown v. Board of Education decision that education “is a right which must be made available to all on equal terms.”
Nine young people and their families filed suit against California’s laws on teacher retention and dismissal, which, they say, protect bad teachers and deprive students of a high-quality education.
The Vergara decision came down less than one month after the 60th anniversary of the Brown decision, in which the U.S. Supreme Court struck down state and federal laws establishing separate public schools for students classified by the government as “white” and “black.”
(In Brown, the Court consolidated cases from Kansas, Virginia, South Carolina, and Delaware, as well as the federal jurisdiction of Washington, D.C.) The Supreme Court found that the practice of segregation violated the provision in the U.S. Constitution that “No State shall make or enforce any law which shall . . . deny to any person within its jurisdiction the equal protection of the laws.”
The argument in the current case, Vergara, is that, by forcing schools to favor incompetent teachers with seniority over more capable junior teachers, the rules deprive students of the education that the state constitution guarantees them. Further, because these rules funnel bad teachers to districts with large numbers of poor and “minority” students, those students are denied the equal treatment of the law.
The Vergara lawsuit was backed by Students Matter, a nonprofit educational policy advocacy group funded by Silicon Valley entrepreneur David Welch. “The state has a responsibility of delivering an education for the betterment of the child,” said Welch. “The state needs to understand that [its] responsibility is to teach children, and teach all of them.” Welch’s organization recruited the nine students, from several school districts, to serve as the public face of the case.
Astonishingly, the teachers’ union response to the ruling was that it was actually an attack on children. “This decision today is an attack on teachers, which is a socially acceptable way to attack children,” said Alex Caputo-Pearl, the president-elect of the Los Angeles teachers union. Instead of providing for smaller classes or more counselors, the reformers “attack teacher and student rights.”
Welch answered that claim in an op-ed for the San Jose Mercury News in which he described the harm students suffer from bad teachers:
According to the testimony of Harvard economist Dr. Thomas Kane, a student assigned to the classroom of a grossly ineffective math teacher in Los Angeles loses almost an entire year of learning compared to a student assigned to a teacher of even average effectiveness. Students assigned to more than one grossly ineffective teacher are unlikely ever to catch up to their peers.
And far from wanting to attack all teachers, Welch in the same article pleaded with his fellow Californians to reward good teachers:
“Let’s offer teachers opportunities for promotions, such as to master teacher, teacher mentor, or department chair, where the skills of a truly excellent, creative educator can reach more children—as well as better pay with incentives for excellence and taking on extra responsibilities or difficult positions.”
No less a union friend than Rep. George Miller (D-Calif.), whose largest campaign support comes from unions, has bluntly admitted, “Vergara will help refocus our education system on the needs of students.” No wonder the teachers’ unions made five separate legal efforts to have the lawsuit dismissed on grounds other than the merits of the case.
California teacher union members number some 445,000. Both the California Teachers Association (CTA, an affiliate of the National Educational Association) and the California Federation of Teachers (CFT, an affiliate of the American Federation of Teachers) plan to appeal the court’s decision. Jim Finberg, a lawyer for the two teachers’ unions, said that Judge Treu’s decision “ignores overwhelming evidence the current laws are working.”
Actually, less than 0.002% of teachers in California are dismissed in any given year. Judge Treu noted that, when an effort is made to fire a teacher, “it could take anywhere from two to almost ten years and cost $50,000 to $450,000 or more to bring these cases to conclusion under the Dismissal Statute, and that given these facts, grossly ineffective teachers are being left in the classroom.”
Judge Treu concluded that “distilled to its basics,” the unions’ position requires them to defend the proposition that the state has a compelling interest in the de facto separation of students from competent teachers, and a like interest in the de facto retention of incompetent ones. The logic of this position is unfathomable and therefore constitutionally insupportable.
Seniority vs. Merit
The Vergara decision overturned a LIFO (last-in/first-out) law requiring that teacher layoffs be based on seniority, rather than individual merit. California’s Permanent Employment Law required that a teacher be tenured after two years at a school (which, because of an early notice requirement, worked out in practice to 18 months or less). California is one of only five states in which tenure may be received after such a short period. As noted by the blog Voices of San Diego:
Regardless of what we call it, here’s how it looks in San Diego Unified. Once they’re hired, rookie teachers have to make it through a two-year probationary period, during which they can be dismissed for pretty much any reason.
But because the district has to tell teachers by mid-March whether they’ll be invited back for the next school year, the trial period is actually shorter than two years. In the past, the district hasn’t been particularly aggressive in the number of probationary teachers it sends away—only about 1 percent wasn’t given tenure.
“With such little time, you don’t even have enough information to actually consider whether they’re an effective teacher,” said Nancy Waymack, a managing director for the reform-advocacy group National Council on Teacher Quality.
Compared to other states, California has some of the strongest laws in place to protect teacher employment. The effect of this case may spur action throughout the nation. “Without a doubt, this could happen in other states,” said Terry Mazany, who served as interim CEO of Chicago’s public schools in 2010-2011. A lawyer for Students Matter said they are already hoping to “engage with policymakers in New York and nationally,” and donor David Welch said the group would consider suits in other states (New Jersey, Connecticut, Maryland, Minnesota, New Mexico, and Oregon were mentioned as possible sites).
Undue Process
The term “due process” refers to a legal or quasi-legal system that protects the rights of an individual, such as by requiring a trial before a person can be executed. Unions defend the complicated procedures for firing teachers by claiming they amount to “due process” that protects those teachers from arbitrary, unfair treatment. As the Pew publication Stateline reports, “The unions argue that the rules protecting teachers are needed for school districts to attract and retain good teachers and to ensure that employees are not fired for arbitrary or unfair reasons.”
But the judge ruled in Vergara that the process has become so cumbersome—that it’s become so difficult to get rid of bad teachers—that it deprives students of their rights. He ridiculed the process as “über due process,” and observed that California state laws already provide a great deal of protection for government and private-sector employees facing dismissal. “Why,” he pleaded, “the need for the current tortuous process” that is mandated only for teachers, a process so unjust, he added, that it was even decried by witnesses called by the teachers’ unions?
James Taranto of the Wall Street Journal noted an irony at the center of the ruling: “The California Supreme Court had applied the same legal premises to hold unconstitutional funding disparities among districts and one district’s decision to end the school year six weeks early owing to a budgetary shortfall. Vergara doesn’t break new legal ground so much as apply precedent in a way that threatens the education establishment. It’s a case of judicial activism coming back to bite the left.”
A permanent job
As noted in Waiting for ‘Superman,’ a documentary promoting educational reform, one out of every 57 doctors loses his or her license to practice medicine, and one of every 97 lawyers loses his or her license to practice law. Yet, in many major cities, only one out of 1,000 teachers is fired for performance-related offenses. The reason is tenure, or as the unions call it, “permanent status.”
Tenure is the practice of guaranteeing a teacher his or her job. Originally, this was a due process guarantee, something intended to work as a check against administrators capriciously firing teachers and replacing them with friends or family members. It was also designed to protect teachers who took political stands the community might disagree with. Tenure as we understand it today was first seen at the university level, where, ideally, professors would work for years and publish many pieces of inspired academic work before being awarded what amounted to a job for life.
At the elementary and high school level, tenure has evolved from the original understanding of “due process” to the university-style “job for life.” In most states, teachers are awarded tenure after only a few years, after which time they become almost impossible to fire. The main function of these laws is to help bad teachers keep their jobs.
►One Los Angeles union representative has said: “If I’m representing them, it’s impossible to get them out. It’s impossible. Unless they commit a lewd act.” Unfortunately for the students who have to learn from these educators, virtually every teacher who works for the Los Angeles Unified School District receives tenure. In a study of its own, the Los Angeles Times reported that fewer than two percent of teachers are denied tenure during the probationary period after being hired. And once they have tenure, there’s no getting rid of them. Between 1995 and 2005, only 112 Los Angeles tenured teachers faced termination—eleven per year—out of 43,000. And that’s in a school district where the high school graduation rate in 2003 was a pathetic 51 percent.
►One New Jersey union representative was even blunter about what his union does to keep bad teachers in the classroom: “I’ve gone in and defended teachers who shouldn’t even be pumping gas.”
In 10 years, only about 47 out of 100,000 teachers were terminated from New Jersey’s schools. Original research conducted by the Center for Union Facts (CUF) has confirmed that almost no teacher is ever fired in Newark, which is New Jersey’s largest school district, no matter how bad a job the teacher does. Over one four-year period, CUF discovered, Newark’s school district successfully fired about one out of every 3,000 tenured teachers annually. This is a city where roughly two-thirds of students never graduate from high school.
►In New York City, the New York Daily News reported that “just 88 out of some 80,000 city schoolteachers have lost their jobs for poor performance” over 2007-2010.
Then there were the so-called “rubber rooms” of New York City, which operated until 2010. Teachers who couldn’t be relieved of duty would report to these “rubber rooms,” where they would be paid to do nothing for weeks, months, even years. According to the New York Daily News, at any given time an average of 700 teachers were being paid not to teach while the district jumped through the hoops, imposed by the union contract and the law, to pursue discipline or termination. (A city teacher in New York who ended up being fired spent an average of 19 months in the disciplinary process.) The Daily News reported that the New York City school district spent more than $65 million annually just to pay the teachers who were accused of wrongdoing. Millions more tax dollars were spent to hire substitutes.
After the embarrassing Daily News story and an exposé in the New Yorker, the union agreed to end the practice of rubber rooms but refused to expedite the dismissal process. Instead of whiling the days away doing nothing, the teachers were assigned to do clerical work and perform other semi-useful tasks.
The problem isn’t limited to teachers accused of wrongdoing. The city spends more than $100 million every year paying teachers who have been excessed (i.e., whose positions have been eliminated) but have yet to find jobs.
According to the Wall Street Journal, the ironclad union contract requires that any teacher with tenure be paid full salary and benefits if he or she is sent to the “Absent Teacher Reserve pool.” The average pay of a teacher in that pool is over $80,000 a year, and some teachers have stayed in the pool for years. The Journal reports that the majority of teachers in the pool had “neither applied for another job in the system nor attended any recruitment fairs in recent months.”
►Things are no better in New York as a whole. The Albany Times Union looked at what was going on statewide outside New York City and discovered some shocking data: Of 132,000 teachers, only 32 were fired for any reason between 2006 and 2011.
►In Chicago, a school system that has by any measure failed its students—only 28.5 percent of 11th graders met or exceeded expectations on that state’s standardized tests—Newsweek reported that only 0.1 percent of teachers were dismissed for performance-related reasons between 2005 and 2008. When barely one in four students nearing graduation can read and do math, how is it possible that only one in one thousand teachers is worthy of dismissal? It may well be that most of the city’s teachers are good teachers, but can 99.9% of them be good?
Effects of tenure and related teacher “protections”
Modeled after labor arrangements in factories, the typical teachers’ union contract is loaded with provisions that do not promote education. These provisions drive away good teachers, protect bad teachers, raise costs, and tie principals’ hands.
● The Dance of the Lemons
One of the more shocking scenes in the documentary Waiting for ‘Superman’ is an animated illustration of “The Dance of the Lemons.” This is no waltz or foxtrot. Rather, it’s the systematic shuffling of incompetent teachers from school to school. These teachers can’t be fired because union contracts require that “excessed” educators, no longer needed at their original school, must be given first crack at new job openings when slots open up elsewhere in the district. Administrators at other schools don’t want to hire these bad teachers, but districts are unable to fire them.
What happens? LA Weekly documented just how this process plays out in Los Angeles in a massive 2010 investigation. “The far larger problem in L.A. is one of ‘performance cases’—the teachers who cannot teach, yet cannot be fired. Their ranks are believed to be sizable—perhaps 1,000 teachers, responsible for 30,000 children. … The Weekly has found, in a five-month investigation, that principals and school district leaders have all but given up dismissing such teachers. In the past decade, LAUSD officials spent $3.5 million trying to fire just seven of the district’s 33,000 teachers for poor classroom performance—and only four were fired, during legal struggles that wore on, on average, for five years each. Two of the three others were paid large settlements, and one was reinstated. The average cost of each battle is $500,000.”
Unintended Consequences, a study by The New Teacher Project (TNTP), documented the damage done by this union-imposed staffing policy. In an extensive survey of five major metropolitan school districts, TNTP found that “40 percent of school-level vacancies, on average, were filled by voluntary transfers or excessed teachers over whom schools had either no choice at all or limited choice.” One principal decried the process as “not about the best-qualified [teacher] but rather satisfying union rules.”
● Thinning the talent pool
One problem related to the destructive transfer system is a hiring process that takes too long and/or starts too late, thanks in part to union contracts. Would-be teachers typically cannot be hired until senior teachers have had their pick of the vacancies, and the transfer process makes principals reluctant to post vacancies at all for fear of having a bad teacher fill it instead of a promising new hire.
In the study Missed Opportunities, The New Teacher Project found that these staffing hurdles help push urban districts’ hiring timelines later to the point that “anywhere from 31 percent to almost 60 percent of applicants withdrew from the hiring process, often to accept jobs with districts that made offers earlier.”
“Of those who withdrew,” the TNTP report continues, “the majority (50 percent to 70 percent) cited the late hiring timeline as a major reason they took other jobs.” It’s the better applicants who are driven away: “Applicants who withdrew from the hiring process had significantly higher undergraduate GPAs, were 40 percent more likely to have a degree in their teaching field, and were significantly more likely to have completed educational coursework” than the teachers who ended up staying around to finally receive job offers.
● Keeping experienced teachers away from poor children
Another common problem with the union contract is a “bumping” policy that fills schools which are more needy (but less desirable to teach in) with greater numbers of inexperienced teachers. In its report Teaching Inequality, the Education Trust noted: “Children in the highest-poverty schools are assigned to novice teachers almost twice as often as children in low-poverty schools. Similarly, students in high-minority schools are assigned to novice teachers at twice the rate as students in schools without many minority students.”
● Bad apples stay
A study conducted by Public Agenda polled 1,345 schoolteachers on a variety of education issues, including the role that tenure played in their schools. When asked “does tenure mean that a teacher has worked hard and proved themselves to be very good at what they do?” 58 percent of the teachers polled answered that no, tenure “does not necessarily” mean that. In a related question, 78 percent said a few (or more) teachers in their schools “fail to do a good job and are simply going through the motions.”
When Terry Moe, the author of Special Interest: Teachers Unions and America’s Public Schools, asked teachers what they thought of tenure, they admitted that the byzantine process of firing bad apples was too time-consuming: 55 percent of teachers, and 47 percent of union members, answered yes when asked “Do you think tenure and teacher organizations make it too difficult to weed out mediocre and incompetent teachers?”
● The union tax on firing bad teachers
So why don’t districts try to terminate more of their poor performers? The sad answer is that their chance of prevailing is vanishingly small. Teachers unions have ensured that even with a victory, the process is prohibitively expensive and time-consuming. In the 2006-2007 school year, for example, New York City fired only 10 of its 55,000 tenured teachers, or 0.018%. The cost to eliminate those employees averages out to $163,142, according to Education Week. The Albany Times Union reports that the average process for firing a teacher in New York state outside of New York City proper lasts 502 days and costs more than $216,000. In Illinois, Scott Reeder of the Small Newspaper Group found it costs an average of $219,504 in legal fees alone to move a termination case past all the union-supported hurdles. In Columbus, Ohio, the teachers’ union president admitted to the Associated Press that firing a tenured teacher can cost as much as $50,000. A spokesman for Idaho school administrators told local press that districts have been known to spend “$100,000 or $200,000” in litigation costs to toss out a bad teacher.
It’s difficult even to entice the unions to give up tenure for more money. In Washington, D.C., school chancellor Michelle Rhee proposed a voluntary two-tier track for teachers. On one tier, teachers could simply do nothing: Maintain their regularly scheduled raises and keep their tenure. On the other track, teachers could give up tenure and be paid according to how well they and their students performed, with the potential to earn as much as $140,000 per year. The union wouldn’t even let that proposal come up for a vote among its members, and stubbornly blocked efforts to ratify a new contract for more than three years. When the contract finally did come up for ratification by the rank and file, the two-tier plan wasn’t even an option.
● Taking money from good teachers to give to bad teachers
During the expansion of teacher collective bargaining in the mid-twentieth century, economists from Harvard and the Australian National University found, the average, inflation-adjusted salary for U.S. teachers rose modestly—while “the range of the [pay] scale narrowed sharply.” Measuring aptitude by the quality of the college a teacher attended, the researchers found that the advent of the collectively bargained union contract for teachers meant that on average, more talented teachers were receiving less, while less talented teachers were receiving more.
The earnings of teachers in the lowest aptitude group (those from the bottom-tier colleges) rose dramatically relative to the average wage, so that teachers who in 1963 earned 73 percent of the average salary for teachers could expect to earn exactly the average by 2000. Meanwhile, the ratio of the earnings of teachers in the highest-aptitude group to earnings of average teachers fell dramatically. In states where the highest-aptitude teachers began with an earnings ratio of 157 percent, they ended with a ratio of 98 percent.
Data from the National Center for Education Statistics, as reported by Education Week, add further evidence to the compressed-pay claim. The Center’s stats indicate that the average maximum teacher pay nationwide is only 1.85 times greater than the nationwide average salary for new teachers.
● Locking up education dollars
Much of the money commanded by teachers’ union contracts is not being used well, at least from the perspective of parents or reformers. Several provisions commonly found in union contracts that cost serious money have been shown to do little to improve education quality. A report from the nonprofit Education Sector found that nearly 19 percent of all public education spending in America goes towards things like seniority-based pay increases and outsized benefits—things that don’t go unappreciated by teachers, but don’t do much to improve the quality of teaching children receive. If these provisions were done away with, the report found, $77 billion in education money would be freed up for initiatives that could actually improve learning, like paying high-performing teachers more money.
● Putting kids at risk
Teachers unions push for contracts that effectively cripple school districts’ ability to monitor teachers for dangerous behavior. In one case, school administrators in Seattle received at least 30 warnings that a fifth grade teacher was a danger to his students. However, thanks to a union contract that forces schools to destroy most personnel records after each school year, he managed to evade punishment for nearly 20 years, until he was finally sent to prison in 2005 for having molested as many as 13 girls. As an attorney for one of the victims put it, according to the Seattle Times, “You could basically have a pedophile in your midst and not know it. How are you going to get rid of somebody if you don’t know what they did in the past?”
The Bottom Line
Too many schools are failing too many children. Americans should not remain complacent about how districts staff, assign, and compensate teachers. And too many teachers’ union contracts preserve archaic employment rules that have nothing to do with serving children.
Even Al Shanker, the legendary former president of the American Federation of Teachers, admitted, “a lot of people who have been hired as teachers are basically not competent.”
This is what the union wants: To keep teachers on the payroll regardless of whether or not they are doing any work or are needed by the school district. Why? As long as they are on the payroll, they keep paying union dues. The union doesn’t care about the children who will be hurt by this misallocation of tax dollars. All union leaders care about is protecting their members and, by extension, their own coffers.
Most teachers absolutely deserve to keep their jobs, and some have begun to speak out about the absurdity of teacher tenure, but it’s impossible to pretend that the number of firings actually reflects the number of bad teachers protected by tenure. As long as union leaders possess the legal ability to drag out termination proceedings for months or even years—during which time districts must continue paying teachers, and substitute teachers to replace them, and lawyers to arbitrate the proceedings—the situation for students will not improve.
The Vergara case offers hope, but supporters of better education cannot rely on judges to fix America’s schools. Parents and teachers must join together to eliminate teacher tenure systems that protect bad teachers and that divert our best teachers away from many of the students who could benefit most from their skills and experience.
About the Author: Richard Berman is executive director of the Center for Union Facts. Some of this material appeared previously on the website TeachersUnionExposed.com, a project of the Center for Union Facts. This article originally appeared on the website Labor Watch, and is republished here with permission.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/#qsqzLkhP1vv17k8o.99
GOVERNMENT DOING WHAT IT DOES BEST
How could we possibly live without government drones telling us what to do and threatening to imprison or fine us if we don’t follow their ridiculous laws, regulations and mandates?
Do you prefer H.L. Mencken’s view on government or Barack Obama’s and the millions of control freaks inhabiting all levels of government across our welfare/warfare/surveillance state?
“Every decent man is ashamed of the government he lives under.”
“The ideal government of all reflective men, from Aristotle onward, is one which lets the individual alone-one which barely escapes being no government at all.”
“All government is, in its essence, organized exploitation, and in virtually all of its existing forms it is the implacable enemy of every industrious and well-disposed man.”
Every election is a sort of advance auction of stolen goods.”
“The storm center of lawlessness in every American State is the State Capitol. It is there that the worst crimes are committed; it is there that lawbreaking attains to the estate and dignity of a learned profession; it is there that contempt for the laws is engendered, fostered, and spread broadcast.”
“A professional politician is a professionally dishonorable man. In order to get anywhere near high office he has to make so many compromises and submit to so many humiliations that he becomes indistinguishable from a streetwalker.”
“The theory behind representative government is that superior men-or at least men not inferior to the average in ability and integrity-are chosen to manage the public business, and that they carry on this work with reasonable intelligence and honest. There is little support for that theory in known facts…”
“The government consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office.”
“The kind of man who wants the government to adopt and enforce his ideas is always the kind of man whose ideas are idiotic.”
“The whole aim of practical politics is to keep the populace alarmed–and hence clamorous to be led to safety–by menacing it with an endless series of hobgoblins, all of them imaginary.”
My contempt for politicians, parties, government, and control freaks knows no bounds.
California City Will Fine Couple $500 For Not Watering Brown Lawn, State Will Fine’em $500 If They Do
When you’re in a steady relationship, communication is clear. Because when mom says to do one thing, and dad says another, the kids get really confused. Such is the case in California, where the state has issued rules for homeowners to conserve water in the midst of extreme drought, with fines of $500 per day or violating those guidelines, but one city is threatening to fine a couple $500 — unless they water their lawn.
In the epitome of a damned if you do, damned if you don’t situation, Laura and Mark received notice from Glendora, Calif. that they’d get a $500 penalty for not watering their brown lawn… on the same day the state approved mandatory outdoor watering restrictions with the same fine for violating that attached, $500.
Why is the lawn brown? Because they’re conserving water. Why are they conserving water? Because California asked them to — the state water board chairman even called brown lawns in Cali a “badge of honor.”
But Mom and dad aren’t communicating effectively, it seems.
“Despite the water conservation efforts, we wish to remind you that limited watering is still required to keep landscaping looking healthy and green,” says the letter, according to the Associated Press, setting a 60-day deadline to get the brown green again.
They’re not alone in the confusion, Laura adds.
“My friends in Los Angeles got these letters warning they could be fined if they water, and I got a letter warning that I could be fined for not watering,” she explains. “I felt like I was in an alternate universe.”
While there’s nothing on the books that says local governments can’t fine citizens for brown lawns, Gov. Jerry Brown’s office isn’t a fan of those fees, either.
“These efforts to conserve should not be undermined by the short-sighted actions of a few local jurisdictions, who chose to ignore the statewide crisis we face, the farmers and farmworkers losing their livelihoods, the communities facing drinking water shortages and the state’s shrinking reservoirs,” said Amy Norris, a spokeswoman for the California Environmental Protection Agency, in a written statement.
But local officials say you shouldn’t have to choose between nice landscaping and being drought-conscious — just because there’s a dearth of water doesn’t mean you have the right to drive down property values, by way of drought-resistant landscaping or turf removal programs.
“During a drought or non-drought, residents have the right to maintain their landscaping the way they want to, so long as it’s aesthetically pleasing and it’s not blighted,” said Al Baker, president of the California Association of Code Enforcement Officers.
Another resident who received violation notices in Orange County says she spent $600 installing such drought-resistant landscaping, and still thinks the whole thing is nuts, especially when she sees signs urging residents to conserve water.
“It’s almost crazy because one agency is telling you one thing and another is forcing you to do the opposite,” she said.
California cities issue warnings about brown lawns even while state encourages saving water [Associated Press]
WALL STREET & THE CHINESE GOV’T ACCOUNT FOR ALL THE CASH PURCHASES OF HOUSES
As the mainstream corporate media, controlled by Wall Street and the government, continues to spout off about a housing recovery, the data proves that average people are NOT buying homes. Average real people must get a mortgage when they buy a home. Mortgage applications are at 15 year lows and going lower. The talking heads and mouthpieces for the oligarchy conveniently ignore this FACT as they generate their feel good propaganda and publish on-line and in their newspapers.
The number of cash purchases of homes is at a record high. As detailed previously, a huge chunk of these purchases are by Blackrock and the other Wall Street shyster firms as they attempt to drive prices higher and relieve the insolvent balance sheets of the Too Big To Trust Wall Street Cabal. Their buy and rent scheme was developed in conjunction with the Federal Reserve and the U.S. Treasury Dept. Bernanke, Yellen, Geithner, Lew, and Obama have conspired with Dimon, Fink, Blankfein and the rest of the Wall Street criminals to keep young people from ever purchasing a home at a fair price.
The other piece of the cash buying puzzle is detailed below by Mike Krieger. The Chinese central authorities have surpassed even the Federal Reserve in blowing epic bubbles with their easy money cronyism. They have blown an epic real estate bubble in China that is in the process of bursting. The hoard of government connected millionaires and billionaires in China have switched their sights to the U.S., just as the Japanese did in the late 1980’s. We all know how well that worked out for the Japanese.
These Chinese buyers are temporarily rich and they are stupid. They do not care about value. They are just attempting to convert their ill-gotten cash into hard assets. They don’t care about price. The result is that prices, especially on the West Coast, have been driven higher. All the price statistics put out by the NAR, Case Shiller, and the Census Bureau are worthless in assessing the true health of the housing market. The entire “recovery” is a government created fraud.
This central bank created bubble will end just as all their previous bubbles have ended – with tears and wealth destruction on an epic scale. Meanwhile, the well connected cronies on Wall Street and in Beijing utilize the free money to enrich themselves and impoverish savers, the young, and anyone foolish enough to purchase at these prices. So it goes.
Chinese Purchases of U.S. Real Estate Jump 72% as The Bank of China Facilitates Money Laundering
American citizens already have a hard enough time affording a home. Squeezed out by financial oligarchs buying tens of thousands of properties for rental income, and faced with real wages that haven’t budged since the mid-1970s, the demographic of U.S. citizens that historically dominated the new home market has been forced to live in their parents’ basements. Just to kick em’ when they’re down, Americans now face the impossible task of competing with laundered Chinese money.
Of course, this isn’t a new trend. I first covered it in January 2013 in the post: Corrupt Chinese Politicians are Buying Billions in U.S. Real Estate. This was then followed up a couple of months ago in the piece: Zillow Opens the Floodgates to Chinese Buyers in Order to Keep Housing Bubble 2.0 Inflated.
While this trend may not be new, it is certainly accelerating. According to the National Association of Realtors in its annual report on foreign home purchases, transactions from Greater China (includes Hong Kong and Taiwan) were up 72% in the past year to $22 billion. In some California communities, 90% of real estate buyers are from China. Yes, 90%. Naturally, many of them are buying multi-million dollar homes in “all cash” transactions.
Bloomberg reports that:
Henry Nunez, a real estate agent in Arcadia, California, met with so many homebuyers from China that he bought a Mandarin-English translation app for his phone.
The $1.99 purchase paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one designed for smoky wok cooking. The buyers were a Chinese couple who paid $3.5 million in cash.
Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the year through March, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.
Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales.
Publicly traded builders are responding by catering to Chinese buyers in areas with high demand.Brookfield Residential Properties Inc. staged feng shui blessing ceremonies before beginning work on projects in Anaheim and Foothill Ranch communities in Orange County, south of Los Angeles. The New Home Co. consulted with a feng shui master on the land plan for its Orchard Park development in San Jose, California, that opened in April.
Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.
“About 90 percent of my buyers are from China,” said Peggy Fong Chen, a broker with Re/Max Holdings Inc., who sold 80 homes in Arcadia last year. “They want new construction. They want two levels. In China, it is considered a mansion if it has two levels.”
Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and ’80s, tearing them down and erecting sprawling houses like the one Nunez sold for $3.5 million, which has a double-height entry hall and wood-paneled library.
“Local people really cannot afford these most of the time,” Chen said.
Since when did anyone care about the interests of the average American citizen anyway?
“A Chinese national bought one of our houses at Arcadia in Irvine after reading about it on a blog,” Tri Pointe CEO Doug Bauer said in a telephone interview. “It was a Chinese blog. We couldn’t even read it.”
Some wealthy Chinese have come up with ways to evade the yearly $50,000 per-person limit on taking money out of the country so they can buy U.S. real estate, Yu said. Methods include laundering money through Macau casinos and cooking the books of import-export companies, he said.
“A lot of people over-invoice export proceeds, so they can park some money outside,” Ha Jiming, chief investment strategist for Goldman Sachs Group Inc.’s China investment management division, said at a Los Angeles conference in April.
“It’s just the beginning of a tidal wave,” he said in a telephone interview.
Overseas buyers are changing Arcadia, according to Nunez, 55, who has lived in the city since he was 6 years old.
“You drive every street and there are three or four new houses being built,” he said. “It’s just incredible, the demand.”
It appears the only people not buying American real estate are Americans needing a place to live.
So what is the fuel behind this demand? As suspected, it appears much of it comes from Chinese laundering dirty money. They are scrambling to get it out of the country before the authorities crack down on the source of these funds. It appears The Bank of China is playing a central role in this money laundering, which may be angering Chinese authorities. We learn from Bloomberg that:
Bank of China Ltd. denied a report by the state broadcaster alleging it broke the nation’s foreign-exchange rules by providing services that help clients move “dirty money” abroad.
Reports by China Central Television and other media “contain discrepancies with and misunderstanding of the facts,” the Beijing-based lender said in a statement on its website late yesterday. “References to an ‘underground bank’ and ‘money laundering’ are inconsistent with the facts.”
CCTV said Bank of China Ltd. was among lenders that circumvented the foreign-exchange regulations. Customers at the country’s fourth-largest lender by market value can convert unlimited amounts of yuan into other currencies through a product called “Youhuitong,” CCTV said in the 20-minute broadcast yesterday, which included interviews with several unidentified employees of the bank.
“Bank of China introduced a cross-border yuan transfer service in 2011 that only allows money to be moved for immigration and overseas property investment purposes,” the lender said. The company has strict and robust operational procedures for its cross-border yuan transfer business, it said.
Youhuitong targets customers who wish to invest in or migrate to North America, Australia and some European countries, CCTV said, referring to documents shown by unidentified Bank of China employees.
Now just imagine what will happen to the U.S. real estate market in these areas when Chinese authorities decide to turn off the spigot…
In Liberty,
Michael Krieger
CALIFORNIA IS EXTREMELY EXCEPTIONAL
How dry I am. Don’t look for food prices to be dropping in the near future.
National Drought Summary for June 24, 2014
Summary
For the second consecutive week, moderate to heavy rainfall brought additional drought relief from the Midwest southward across the central Plains into Texas. Meanwhile, drought conditions prevailed from California into the central and southern Rockies.
Alaska, Hawaii, and Puerto Rico
There were no changes made to the drought depiction in Alaska and Hawaii this week. In Alaska, cool weather and locally heavy showers were noted across much of the state, with streamflows in the northern Abnormal Dryness (D0) areas exhibiting some recovery. Additional rainfall over the ensuing weeks would likely warrant some D0 reduction. In Hawaii, some areas of leeward dryness are developing but remained fairly localized. In Puerto Rico, D0 was expanded into the northeastern quarter of the island where 90-day rainfall deficits (50 to 70 percent of normal) has resulted in streamflows drooping locally below the 10th percentile.
Central Plains
Conditions remained largely unchanged on the central High Plains during the monitoring period, as hot weather (readings as high as 100°F) offset the light to moderate showers (0.1 to 1 inch) which dotted western portions of the region. A small expansion of Extreme Drought (D3) in southwestern Kansas reflected increasingly poor vegetation health as indicated by satellite, with potential for additional degradations in this area if rain fails to materialize soon. Farther east, however, locally heavy downpours — with totals averaging 2 to locally more than 4 inches — resulted in some removal of Moderate (D1) and Severe (D2) Drought in central and southwestern Nebraska. In these areas, precipitation over the past 30 days has averaged 150 to 260 percent of normal. In Kansas, showers were mostly too light to warrant any additional improvement on top of last week’s drought reduction, though locally heavy downpours (2 to 4 inches) allowed for minor decrease of Extreme Drought (D3) in southern portions of the state.
Delta
After last week’s beneficial showers, mostly dry, warm weather prevailed in the Moderate (D1) and Severe (D2) Drought areas of southwestern Louisiana. Soil moisture remains limited in these locales due to pronounced dryness over the past 90 days (locally less than 50 percent or normal). The rest of the Delta remained free of drought. NOTE: At the end of the period, locally heavy showers and thunderstorms developed over the Delta’s drought areas, and the resultant benefit —if any — will be addressed in next week’s U.S. Drought Monitor.
Mid-Atlantic and Northeast
Drier-than-normal conditions prevailed over eastern portions of the region during the monitoring period, which coupled with declining streamflows led to an expansion of Abnormal Dryness (D0) in southeastern New Hampshire and neighboring locales. Precipitation over the past 60 days has totaled 50 to 70 percent of normal in the D0 areas, and streamflows have likewise dipped below the 20th percentile. In contrast, showers dotted the Mid-Atlantic region, with locally more than 2 inches of rain bordering areas with little — if any — rainfall. Overall, soil moisture remained adequate to abundant for pastures and summer crops.
Midwest
Moderate to heavy rainfall further reduced or eradicated drought but submerged low-lying fields and caused additional river flooding in western and central portions of the region. Persistent showers and thunderstorms doused areas from central Nebraska into Iowa and northern Illinois with 2 to 4 inches of rainfall, with locally higher amounts. The rain was more than sufficient to warrant additional 1-category improvements over the western half of the Corn Belt. Despite the additional heavy downpours, long-term precipitation deficits linger (less than 70 percent of normal over the past 12 months) in west-central and southeastern Iowa; consequently, a small area of Moderate Drought (with a Long Term, or “L”, designation) remained where shortfalls are most pronounced. In contrast, short-term dryness (90-day rainfall averaging 50 to 70 percent of normal) led to a small increase of Abnormal Dryness (D0) in southeastern South Dakota.
Ohio Valley and Southeast
Pronounced short-term rainfall deficits and above-normal temperatures led to an expansion of Abnormal Dryness (D0) in Kentucky and along the Ohio River. In the expanded D0 area, 30-day rainfall has totaled locally less one-third of normal, which coupled with temperatures up to 7°F above normal caused a rapid decline in soil moisture and streamflows. Farther south, locally dry conditions from east-central Georgia northward into western South Carolina warranted D0 expansion, with precipitation over the past 60 days tallying 35 to 60 percent of normal. Localized dryness and declining streamflows also led to the introduction of a small D0 area south of Asheboro, NC, where streamflows have dropped below the 10th percentile. In Florida, another round of locally heavy showers and thunderstorms (generally 1 to 4 inches, with some reports as high as 7 inches) facilitated the removal of the remaining D0 in southern-most portion of the state. The rest of the southeastern quarter of the nation saw scattered showers and thunderstorms, which were sufficient to prevent any introduction or expansion of D0.
Southern Plains and Texas
Despite temperatures in the 90s, rainfall during the week was sufficient to warrant modest to significant reductions in drought from northern and central Oklahoma southward into Texas. Showers and thunderstorms dropped 2 to locally more than 4 inches of rain from the eastern Oklahoma panhandle southeastward into central Oklahoma and east-central Texas. In particular, there were numerous reports of more than 3 inches west of Oklahoma City, and several totals in excess of 7 inches southwest of Dallas-Fort Worth. Consequently, drought intensity declined in areas where the heaviest rain fell, although long-term impacts continue (i.e. reservoir storage and ground water supplies). Farther south, a slow-moving disturbance drifted north from northeastern Mexico along the Rio Grande River Valley, dropping moderate to excessive rainfall (2 to 5 inches, with localized amounts in excess of 8 inches) from Laredo to the western Edwards Plateau. Likewise, a separate area of showers and thunderstorms (1 to 3 inches) swept across Texas’ Trans-Pecos region later in the week. These two areas of rain resulted in notable decreases in drought intensity and coverage across southern and western Texas.
Western U.S.
Variable conditions in the north contrasted with ongoing drought elsewhere. In addition, the return of hot weather in California and the Southwest accelerated moisture losses and increased irrigation requirements.
In northern portions of the region, a slow-moving Pacific storm generated locally heavy rain and mountain snow across the northern Rockies, with showers from this system (locally more than inch) spilling into northeastern drought areas of Washington. Consequently, modest reductions were made to drought intensity and coverage in the mountains and foothills of northeast Washington, where Water Year precipitation was mostly near normal (80-95 percent of normal). Appreciable rainfall bypassed southwestern portions of Columbia River Valley, where Moderate (D1) and Severe (D2) Drought were expanded to reflect poor crop conditions and much-below-normal Water Year precipitation (40-50 percent of normal). To further illustrate the drought’s impacts, the USDA-NASS reported Washington’s winter wheat slipped 1 percentage point to 27 percent poor to very poor as of June 22, with only 30 percent rated good to excellent.
Farther south, California and the Great Basin will most likely have to wait until the 2014-15 Water Year for drought relief. In northern and central California, Exceptional Drought (D4) reflected abysmal 2013-14 Water Year precipitation totals; from northern portions of the Coastal Range to Mt. Shasta, precipitation since October 1 totaled 30 to 50 percent of normal (deficits of 16 to 32 inches). The corresponding Standardized Precipitation Indices (SPI), which helps quantify precipitation in terms of drought and historical probability, are well into the Extreme (D3) to Exceptional (D4) categories. Similar precipitation rankings (D3 or D4 equivalent) are prominent for the past Water Year from San Francisco south to Santa Barbara and east to the Sierra Nevada, including most of the San Joaquin Valley.
In the central Rockies and Four Corners, there were no changes to this week’s drought depiction. Extreme Drought (D3) remains entrenched across west-central Arizona and along the Arizona-New Mexico border, with Water-Year precipitation in these locales totaling less than half of normal (locally below 30 percent of normal) .
Looking Ahead
Warm, humid, and unsettled conditions will persist from the central and southern Plains to the Mid-Atlantic and Southeast Coast. Embedded within this large area of unsettled weather, the greatest potential for heavy rain will be over the Upper Midwest and northern Plains as well as the central and western Gulf Coast region. Showers are also expected across the Northwest — though the rain is expected to once again bypass primary Northwestern drought areas — and in the Northeast. The NWS 6-10 day outlook for July 1-5 calls for wetter-than-normal conditions east of the Mississippi and from the Four Corners into the central Plains as well as southern Texas. Conversely, drier-than-normal weather is expected from the Northwest east to the northern Plains. Above-normal temperatures are anticipated across much of the nation, with cooler-than-normal conditions confined to the Upper Midwest, Texas, and the coastal Pacific Northwest.
Author(s):
Eric Luebehusen, U.S. Department of Agriculture
WHEN IN DOUBT – LIE
It’s easy to balance the budget when you make $32 billion of “mistakes” all going in the same direction to make your budget look better than it really is. And millions of willfully ignorant drones in this country want government to have more power, more control, and more of our money. Then they try to blame libertarians for the fucked up state of this country.
How “Accounting Mistakes” Cost California Taxpayers $32 Billion This Year
Submitted by Tyler Durden on 06/01/2014 20:06 -0400
Spend more than 30 minutes watching TV in California and you will be bombarded by politicians proclaiming they single-handedly balanced the budget, brought prosperity back to the Silicon Valley alone, and turned water into wine. Yet, oddly, there is one thing none of them seem too quick to admit to. As CBS reports, the state office in charge of keeping track of California taxpayers’ money made tens of billions of accounting mistakes. CBS added it up and came up with a big number: $31.65 billion in errors. That’s more than the gross domestic product of Iceland and Jamaica combined.
Controller John Chiang’s office is the state’s financial watchdog, but an audit by the Bureau of State Audits claims the office’s accounting is off by billions of dollars.
The audit revealed:
- $7.7 billion – Understated federal trust fund revenues and expenditures
- $653 million – Overstated general fund assets and revenues
- $8 billion – Overstated California State University’s bond debt
- $9.1 billion – Reporting error that understated a public building construction fund
- Also there was a deferred tax-revenue figure posted as $6.2 billion when it was actually $6.2 million.
All told, that’s more than $31 billion in mistakes.
Sacramento State accounting professor John Corless agrees with auditors saying those glaring mistakes should have been caught by somebody.
“Someone’s not using their equipment right, and they’re not using their heads,” he said.
Republican consultant Mitch Zak is calling for an investigation.
“It’s offensive as a taxpayer,” he said. “There’s no consideration it appears if they misstate or mismanage my tax dollars that there’s any retribution.”
Chiang is running for state treasurer. His aides refused to go on camera for this story.
They said they concur with the assessment, and they blame high staff turnover and a lack of qualified staff, budget cuts, and late and incorrect data from numerous agencies.
Of course, we are sure that no one knows anything about it; no one is responsible for the errors; no one is accountable for the missing money; but a full-scale probe-y investigation will be launched… well played government. Doesn’t matter after all – it’s not their money.
SEE WHAT $600,000 GETS YOU IN LOONEY LOS ANGELES
No bubble here. This is completely rational. QE had nothing to do with this. ZIRP had nothing to do with this. Wall Street hedge funds had nothing to do with this. They ain’t making more land. Home prices never fall. Paying $600,000 for a 1,200 square foot dump in the paradise of Pasadena is a brilliant investment. What could possibly go wrong? Some people never learn.
Guest Post by Doctor Housing Bubble
We have an astute audience that reaches beyond the confines of the 405 and 10 freeways. I know it is hard for some readers to see beyond PCH but it is true, the U.S. is an expansive and far reaching country. It is hard for some readers to grasp the endless boom and bust cycles of Southern California real estate. So today, we’ll take a trip to three fairly popular cities and see what we can get with a $600,000 to $650,000 budget. I’d be interested to see what those outside of the area and those within it have to say about these properties and their current prices. What you will find is that inventory is growing and house horny buyers are itching to dive into housing even if it means taking on ARMs once again. Those that bought a few years ago will now find it difficult if not impossible to purchase today. Has the economy so radically changed to justify 20 to 30 percent price increases within one year? This market is still being driven by hot money although it is starting to cool off. Visually seeing what we can get for $600,000 to $650,000 in Pasadena, Arcadia, and Torrance might give you a good idea of what the current market is like. For those outside of the area, welcome to SoCal housing!
A trip into three L.A. County cities
It is important to note before diving into these examples that most traditional buyers are not entering the housing market with big down payments. In fact, here in SoCal, we have ARM usage doubling in the last year as households try to stretch their budgets to the maximum potential. It would be useful to note that the 30-year fixed rate mortgage is still hovering near all-time historical lows. The ideal scenario is always bandied about with a 20 percent down payment as if many people have $120,000 laying around to throw into a pre-World War II property.
The facts simply do not show that to be true. You have cash investors buying properties as investments. You have other markets being driven by foreign investment. In the middle of all of this you have traditional buyers stretching their budgets to cram into properties. It is an odd mix that is fully unsustainable. I’ve seen a few booms and busts and this goes back to the 1980s so why are we to expect any different outcome this time especially given the current market outlook?
Let us first look at a property in Pasadena.
1024 N Sierra Bonita Ave, Pasadena, CA 91104
3 beds, 2 baths listed at 1,200 square feet
Year built: 1924
List price: $635,000
A nice property albeit rather small for $635,000. The last sale on this home took place in 2004 for $489,000. It has had some work done in the interior but again, this place was built in 1924 (before the Great Depression). What is interesting is looking at the tax data. In 2004 the place was assessed for tax purposes at $226,183. When it sold, it was then reassessed for $504,981 in 2005. Taxes slowly went up peaking in 2009 at $535,887. Then in 2010, it looks like it was reassessed at $489,000 and remained there until 2013, where it was upped once again to $529,000. If this sells at $635,000 we will have a much higher tax assessment. Of course the government loves nothing more than higher home prices to collect more taxes. You can see how tricky things can get especially with that jump in 2004 from $226,183 to $504,981. Did the joy of living in this house with all public access suddenly get twice as good in one year? Probably not but the tax bill did.
Our next home is in Arcadia.
5520 N Santa Anita Ave, Arcadia, CA 91006
3 beds, 2 baths listed at 1,232 square feet
Year built: 1965
List price: $650,000
This home is slightly newer than the other home being built in 1965. I love that the ad says this place is a “must see home for people that love their privacy.” Of course all other homes are for suckers that hate privacy and want their life an open exhibition to the public. California housing affordability sucks. It has gotten dramatically worse in the last year. Some of these homes are the golden tickets being offloaded by baby boomers onto a market were housing fever is still raging on. This home last sold in 2004 for $400,000. No surprise that we see an assessment jumping from $259,760 to $416,160 from 2004 to 2005.
Let us finally look at our last example on our $600,000 house hunting trip in Torrance.
2378 W 233rd St, Torrance, CA 90501
3 beds, 2 baths listed at 1,296 square feet
Year built: 1959
List price: $619,900
This home was built in 1959 and the last sale occurred in 1986 for $100,000. I love how the ad mentions the following:
“Large Private Backyard With Rv Access! Plenty of Room For Your Boat, Jet Ski’s Or Rv. Move In Condition! Welcome Home!”
Caption every word because you are spending $619,900 here. What is the current tax assessment? $158,524. So good luck to the new buyer that will be paying nearly 4 times the amount in taxes as the current owners here.
I assure you that folks with serious cash are not spending their weekends trying to outbid each other here. That is simply the truth. Do you see a couple made up of a lawyer and accountant buying these places? The people I do see buying these properties are house horny buyers simply trying to chase the aspiration of getting a hold of SoCal real estate and justifying that $600,000 and $700,000 is somehow affordable. The Torrance property is likely to be an offloading from a boomer.
It is interesting that when I post articles like this one with actual examples, people try to refute it by saying “well look at the history here, it is clearly going up therefore buying is an easy decision.” But when I respond that they should buy this place and let me know when they close escrow since it is such a no brainer they usually want someone else to take the dive. If you found a great stock that you just “knew” would go up, you would be silly not to buy. The same should be the case with real estate. The problem of course is that at these prices, it is not an easy decision. In fact, it looks like a mini-bubble with a different flavor. With these properties, even with a $120,000 down payment you are looking at a monthly carrying cost of $2,800 to $3,000 for 30 years. Most of those in the industry usually fail to look at the opportunity cost lost by the down payment after 30 years in alternative investments and the net difference between renting and buying. Then again, that is usually how we end up with baby boomers with inadequate retirement accounts living in these million dollar tickets while eating canned tuna to stay afloat. Just because the momentum is up, doesn’t mean it is a good time to buy. You can ask the 7,000,000+ U.S. homeowners that recently faced foreclosure if the “housing always goes up” argument is enough to make housing a great investment no matter the underlying price.
U.S. FOOD SUPPLY IN DANGER
This is not a story from some gloom and doom website. It’s from The Weather Channel. Get ready for much higher prices. I hear cat food doesn’t taste that bad.
California Drought Threatens Food Supply of All Americans; Collapsing Aquifer Sinking the Land
Stephen NeslagePublished: May 22, 2014, 3:23 PM EDTweather.com
Cracked: San Joaquin Valley sinking due to drought
Walk into any grocery store in America and there’s a good chance the fresh produce you see there was grown in California. Up to half of the nation’s fruit, nuts and vegetables are grown in the Central Valley, one of the planet’s most fertile growing regions, between Los Angeles and Sacramento.
Now, for the first time this century, the entire state is in severe to exceptional drought.
“It’s really depressing for us to leave ground out. We’re still paying taxes and payments on everything that’s non-production,” said Gene Errotabere, whose family has farmed the valley since the late 1920s. “I mean, it’s this whole valley. It’s just a breadbasket of our whole country here, and to see this much ground being fallowed is not something I like to see.”
(MORE: Texas Town Forced to Drink Toilet Water Because of the Drought?)
Errotabere says his farm is in uncharted territory and on the verge of catastrophe. Thirty percent of his fields have been fallowed this year, and if these conditions continue, more growing operations could be shut down.
“If we have one more year like we had these past two years, it’s going to be devastating out here. … We’ll probably have 60 to 65 percent of our production out next year.”
The consequences are staggering near towns like Mendota. Dried-up fields blow dust into the sky. River beds and canals, once full of water, are now full of dead weeds and rattlesnakes. Fruit orchards along Interstate 5 look like burned piles of firewood. Workers who used to make a living picking fruit and working machinery now stand in government supported food lines to feed their families. No water means no jobs.
Mendota Mayor Robert Silva doesn’t mince words when discussing the disaster.
“Roughly about 40 percent unemployment … it’s higher than normal right now because of the water situation and farmers not planting. It’s indication that it’s going to be close to maybe 55 percent by the time situation is over.
“It’s ugly to see people standing in line because they’re out of a job.”
USGS Photo
A pole is marked with the land levels in Mendota, California, showing the drastic sinking of the land for nearly a century.
The San Joaquin River runs through the heart of this arid growing region and in a normal year would flow with fresh snow melt from the Sierra. But there’s little snow in the mountains, and little water in the river.
“Imagine washing the dirt off your driveway. That’s what the water is like in the San Joaquin River,” said Jeff Holt, a restoration biologist with River Partners in California, who got emotional when he looked at what’s left of the river. “This is the worst I’ve ever seen it. There’s no water for anything.”
To combat drought conditions, farmers and cities use water wells to tap underground aquifers. But those aquifers are overused and the rapidly declining water levels are causing the once water rich cavities to collapse in a process known as subsidence.
A recent report from USGS hydrologist Michelle Sneed paints a grim picture: A valley the size of Rhode Island is sinking.
(WATCH: California Now in the Deepest Stages of Drought)
“About 11 inches a year … is among the fastest rates ever measured in the San Joaquin Valley,” she said. “It’s a very large subsidence bowl. We were also surprised the high rate of subsidence.”
It’s irreversible damage. One area near Mendota is nearly 30 feet lower than it was in 1926, increasing the risk for infrastructure damage and even severe flooding in the future.
“This subsidence is permanent,” said Sneed. “If water levels come back up, the subsidence will not be recovered. The land will stay subsided.”
THE COYOTE
Hat Tip Boston Bob
The Coyote
California
The Governor of California is jogging with his dog along a nature trail. A coyote jumps out and attacks the Governor’s dog, then bites the Governor.
The Governor starts to intervene, but reflects upon the movie “Bambi” and then realizes he should stop because the coyote is only doing what is natural.
He calls animal control. Animal Control captures the coyote and bills the state $200 testing it for diseases and $500 for relocating it.
He calls a veterinarian. The vet collects the dead dog and bills the State $200 testing it for diseases.
The Governor goes to hospital and spends $3,500 getting checked for diseases from the coyote and on getting his bite wound bandaged.
The running trail gets shut down for six months while Fish & Game conducts a $100,000 survey to make sure the area is now free of dangerous animals.
The Governor spends $50,000 in state funds implementing a “coyote awareness program” for residents of the area.
The State Legislature spends $2 million to study how to better treat rabies and how to permanently eradicate the disease throughout the world.
The Governor’s security agent is fired for not stopping the attack. The state spends $150,000 to hire and train a new agent with additional special training re the nature of coyotes.
PETA protests the coyote’s relocation and files a $5 million suit against the state.
Texas
The Governor of Texas is jogging with his dog along a nature trail. A coyote jumps out and attacks his dog.
The Governor shoots the coyote with his state-issued pistol and keeps jogging. The Governor has spent 50 cents on a .45 ACP hollow-point cartridge.
The buzzards eat the dead coyote.
And that, my friends,
is why California is broke
and Texas is not
FLEEING CALIFORNIA, ANOTHER VIEW
Over on the “California Fleeing” article posted by AWD, I took a few pings for not writing off California as a failed state just yet and pointing to California’s geographic location and its abundance of natural resources. Those pings ticked me off, so I guess I’ll have to give you Doom and Gloomers a reality check. Here goes.
California is the nation’s #2 producer of commercial seafood, after Louisiana.
California is the nation’s #3 producer of commercial timber, after Washington and Oregon.
California is the nation’s LEADING producer of commercial hard minerals, including silver, copper (yes, copper – not Montana or Arizona, but California), manganese, tungsten, and uranium. If you throw in the value of oil and natural gas production to the mineral mix, it still ranks #3 behind Texas and Louisiana.
California has the greatest variety of minerals to be found anywhere in the U.S., with 39 minerals of commercial value found ONLY in California. Think Rare Earth minerals for starters, because your laptops, iPads, and smart phones wouldn’t work without them.
California ranks #1 in the U.S. for tourist visits and tourism dollars. “Hey, SSS,” you might ask, “what does tourism have to do with location and natural resources?” “How about its climate, beaches, Yosemite National Park, the Sierra Nevada mountains, Lake Tahoe, Redwood forests, Sequoia National Forest, and Death Valley for starters,” I would answer. Places like Disneyland, Knott’s Berry Farm, ski areas, sports tournaments, zoos, Hollywood movie set tours, and world class resorts don’t hurt, of course.
I saved the best for last. Do you like to eat? Well, do you, punk?
California is the #1 farming state in the U.S., by a country mile. It is the #5 supplier of food on the entire fucking planet. It produces 50% (!!!!) of U.S. grown fruits and vegetables, and get this, it is the #1 producer of dairy products – milk, cream, ice cream, and cheese – in the nation. Not Wisconsin, amigos, California.
As for so-called “specialty foods,” no other state comes close to California. The list is long: almonds, artichokes (mmm, tasty), avocados, figs, olives, pistachios, plums/prunes, pomegranites, raisins, and walnuts, just to name a few. All of this enormous agricultural activity is made possible by California’s unique location and its wide variety of climates and soils.
Here’s my bottom line. Even a long, recent string of extremely liberal governments in Sacramento has been unable to destroy this wealth of natural resources which sustains California even today. Not that the liberal left in that goofy state isn’t trying. And I certainly don’t dismiss some critical issues California faces, with water and energy production at the top of the list.
But, for the above reasons mentioned, I wouldn’t write off California just yet. Mother Nature has blessed that state many times over. Too bad the majority of voters there don’t appreciate it, or even realize it.
Actual photo of SSS, TBP’s lead investigative reporter who smugly dismisses his detractors.
2011 – THE YEAR OF CATCH-22
I wrote this on January 3. It was my outlook for 2011. Whenever I think I’m too pessimistic about the world, I go back and read old articles. This article is less than 4 months old and the situation has gotten much worse, much faster than I anticipated. The economy has slowed dramatically, even with the payroll tax cut and Ben’s QE2. I now think the 2nd half of 2011 will be outright recession. Again, my own words prove than I’m actually an optimist compared to what really happens. Think about that the next time you get depressed by one of my articles.
As I began to think about what might happen in 2011, the classic Joseph Heller novel Catch 22 kept entering my mind. Am I sane for thinking such a thing, or am I so insane that asking this question proves that I’m too rational to even think such a thing? In the novel, the “Catch 22” is that “anyone who wants to get out of combat duty isn’t really crazy”. Hence, pilots who request a fitness evaluation are sane, and therefore must fly in combat. At the same time, if an evaluation is not requested by the pilot, he will never receive one (i.e. they can never be found “insane”), meaning he must also fly in combat. Therefore, Catch-22 ensures that no pilot can ever be grounded for being insane – even if he were. The absurdity is captured in this passage:
There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane, he had to fly them. If he flew them, he was crazy and didn’t have to; but if he didn’t want to, he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle. “That’s some catch, that Catch-22,” he observed. “It’s the best there is,” Doc Daneeka agreed. – Catch 22 – Joseph Heller
The United States and its leaders are stuck in their own Catch 22. They need the economy to improve in order to generate jobs, but the economy can only improve if people have jobs. They need the economy to recover in order to improve our deficit situation, but if the economy really recovers long term interest rates will increase, further depressing the housing market and increasing the interest expense burden for the US, therefore increasing the deficit. A recovering economy would result in more production and consumption, which would result in more oil consumption driving the price above $100 per barrel, therefore depressing the economy. Americans must save for their retirements as 10,000 Baby Boomers turn 65 every day, but if the savings rate goes back to 10%, the economy will collapse due to lack of consumption. Consumer expenditures account for 71% of GDP and need to revert back to 65% for the US to have a balanced sustainable economy, but a reduction in consumer spending will push the US back into recession, reducing tax revenues and increasing deficits. You can see why Catch 22 is the theme for 2011.
It seems the consensus for 2011 is that the economy will grow 3% to 4%, two million new jobs will be created, corporate profits will rise, and the stock market will rise another 10% to 15%. Sounds pretty good. The problem with this storyline is that it is based on a 2010 that gave the appearance of recovery, but was a hoax propped up by trillions in borrowed funds. On January 1, 2010 the National Debt of the United States rested at $12.3 trillion. On December 31, 2010 the National Debt checked in at $13.9 trillion, an increase of $1.6 trillion.
The Federal Reserve Balance Sheet totaled $2.28 trillion on January 1, 2010. Today, it stands at $2.46 trillion, an increase of $180 billion.
Over this same time frame, the Real GDP of the U.S. has increased approximately $350 billion, and is still below the level reached in the 4th Quarter of 2007. U.S. politicians and Ben Bernanke spent almost $1.8 trillion, or 13% of GDP, in one year to create a miniscule 2.7% increase in GDP. This is reported as a recovery by the mainstream corporate media mouthpieces. On September 18, 2008 the American financial system came within hours of a total meltdown, caused by Wall Street mega-banks and their bought off political cronies in Washington DC. The National Debt on that day stood at $9.7 trillion. The US Government has borrowed $4.2 since that date, a 43% increase in the National Debt in 27 months. The Federal Reserve balance sheet totaled $963 billion in September 2008 and Bernanke has expanded it by $1.5 trillion, a 155% increase in 27 months. Most of the increase was due to the purchase of toxic mortgage backed securities from their Wall Street masters.
Real GDP in the 3rd quarter of 2008 was $13.2 trillion. Real GDP in the 3rd quarter of 2010 was $13.3 trillion.
Think about these facts for one minute. Your leaders have borrowed $5.7 trillion from future unborn generations and have increased GDP by $100 billion. The financial crisis, caused by excessive debt creation by Wall Street and ridiculously low interest rates set by the Federal Reserve, 30 years in the making, erupted in 2008. The response to a crisis caused by too much debt and interest rates manipulated too low was to create an immense amount of additional debt and reduce interest rates to zero. The patient has terminal cancer and the doctors have injected the patient with more cancer cells and a massive dose of morphine. The knowledge about how we achieved the 2010 “recovery” is essential to understanding what could happen in 2011.
Confidence Game
Ben Bernanke, Timothy Geithner, Barack Obama, the Wall Street banks, and the corporate mainstream media are playing a giant confidence game. It is a desperate gamble. The plan has been to convince the population of the US that the economy is in full recovery mode. By convincing the masses that things are recovering, they will begin to spend and buy stocks. If they spend, companies will gain confidence and start hiring workers. More jobs will create increasing confidence, reinforcing the recovery story, and leading to the stock market soaring to new heights. As the market rises, the average Joe will be drawn into the market and it will go higher. Tax revenues will rise as corporate profits, wages and capital gains increase. This will reduce the deficit. This is the plan and it appears to be working so far. But, Catch 22 will kick in during 2011.
Retail sales are up 6.5% over 2009 as consumers have been convinced to whip out one of their 15 credit cards and buy some more iPads, Flat screen TVs, Ugg boots and Tiffany diamond pendants. Consumer non-revolving debt for autos, student loans, boats and mobile homes is at an all-time high as the government run financing arms of GMAC and Sallie Mae have issued loans to anyone that can fog a mirror with their breath. Total consumer credit card debt has been flat for 2010 as banks have written it off as fast as consumers can charge it. The savings rate has begun to fall again as Americans are being convinced to live today and not worry about tomorrow. Of course, the current savings rate of 5.9% would be 2% if the government was not dishing out billions in transfer payments. Wages have declined by $127 billion from the 3rd Quarter of 2008, while government transfer payments for unemployment and other social programs have increased by $441 billion, all borrowed.
Both the government and its citizens are living the old adage:
Everybody wants to get to heaven, but no one wants to practice what is required to get there.
The government politicians and bureaucrats promise to cut unsustainable spending as soon as the economy recovers. The economy has been recovering for the last 6 quarters, according to GDP figures, but there are absolutely no government efforts to cut spending. This is proof that politicians always lie. It will never be the right time to cut spending. Another faux crisis will be used as a reason to continue unfunded spending increases. Having consumer spending account for 70% of GDP is unbalanced and unsustainable. Everyone knows that consumer spending needs to revert back to 65% of GDP and the Savings Rate needs to rise to 8% or higher in order to ensure the long-term fiscal health of the country. Savings and investment are what sustain countries over time. Borrowing and spending is a recipe for failure and bankruptcy. The facts are that consumer expenditures as a percentage of GDP have actually risen since 2007 and Congress and Obama just cut payroll taxes in an effort to encourage Americans to spend even more borrowed money. Catch 22 is alive and well.
The first half of 2011 is guaranteed to give the appearance of recovery. The lame-duck Congress “compromise” will pump hundreds of billions of borrowed dollars into the economy. The continuation of unemployment benefits for 99 weeks (supposedly to help employment) and the 2% payroll tax cut will goose consumer spending. Ben Bernanke and his QE2 stimulus for poor Wall Street bankers is pumping $75 billion per month ($3 to $4 billion per day) directly into the stock market. Since Ben gave Wall Street the all clear signal in late August, the NASDAQ has soared 25%. Despite the fact that there are 362,000 less Americans employed than were employed in August 2010, the mainstream media will continue to tout the jobs recovery. The goal of all these efforts is to boost confidence and spending. Everything being done by those in power has the seeds of its own destruction built in. The Catch 22 will assert itself in the 2nd half of 2011.
Housing Catch 22
Ben Bernanke, an Ivy League PhD who should understand the concept of standard deviation, missed a 3 standard deviation bubble in housing as ironically pointed out by a recent Dallas Federal Reserve report.
Home prices still need to fall 23%, just to revert to its long-term mean. That is a fact that even Bernanke should be able to grasp (maybe not). Anyone who argues that housing has bottomed and will resume growth either has an agenda (NAR) or is a clueless dope (Bernanke). A new perfect storm is brewing for housing in 2011 and will not subside until late 2012. You may have thought those bad mortgages had been all written off. You would be wrong. There will be in excess of $200 billion of adjustable rate mortgages that reset between 2011 and 2012, with in excess of $125 billion being the dreaded Alt-A mortgages. This is a recipe for millions of new foreclosures.
According to the Dallas Fed, in addition to the 3.9 million homes on the market, there is a shadow inventory of 6 million homes that will be coming on the market due to foreclosure. About 3.6 million housing units, representing 2.7% of the total housing stock, are vacant and being held off the market. These are not occasional-use homes visited by people whose usual residence is elsewhere but units that are vacant year-round. Presumably, many are among the 6 million distressed properties that are listed as at least 60 days delinquent, in foreclosure or foreclosed in banks’ inventories.
The coup de grace for the housing market will be Ben Bernake’s ode to Catch 22. In his November 4 OP-ED piece he had this to say about his $600 billion QE2:
“Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance.” – Housing sage Ben Bernanke
On the day Bernanke wrote these immortal words 30 Year Mortgage rates were 4.2%. Today, two months later, they stand at 5.0%. This should be a real boon to refinancing and the avalanche of mortgage resets coming down the pike. It seems that money printing and a debt financed “recovery” leads to higher long-term interest rates. The more convincing the recovery, the higher interest rates will go. The higher interest rates go, the further the housing market will drop. The further housing prices drop, the number of underwater homeowners will grow to 30%. This will lead to more foreclosures. Approximately 50% of all the assets on banks books are backed by real estate. Billions in bank losses are in the pipeline. Do you see the Catch 22 in Bernanke’s master plan? The Dallas Fed sees it:
This unease highlights the housing market’s fragility and suggests there may be no pain-free path to the eventual righting of the market. No perfect solution to the housing crisis exists. The latest price declines will undoubtedly cause more economic dislocation. As the crisis enters its fifth year, uncertainty is as prevalent as ever and continues to hinder a more robust economic recovery. Given that time has not proven beneficial in rendering pricing clarity, allowing the market to clear may be the path of least distress. – Dallas Fed
Quantitative Easing Catch 22
Ben Bernanke’s quantitative easing (dropping dollars from helicopters) is riddled with Catch-22 implications. Bernanke revealed his plan in his 2002 speech about deflation:
“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”
The expectations of most when reading Ben’s words were that his helicopters would drop the dollars across America. What he has done is load up his helicopters with trillions of dollars and circled above Wall Street for two years continuously dropping his load. Bernanke’s quantitative easing, which will triple the Fed’s balance sheet by June of 2011, began in earnest in early 2009. The price for a gallon on gasoline was $1.62. Today, it is $3.05, an 88% increase in two years. Gold was $814 an ounce. Today, it is $1,421 an ounce, a 61% increase in two years. In the last year, the prices for copper, silver, cotton, wheat, corn, coffee and other commodities have risen in price by 30% to 90%.
Quantitative easing has been sold to the public as a way to avoid the terrible ravages of deflation. The fact is there are less jobs, lower wages, lower home prices, zero returns on bank deposits, higher fuel costs, higher food costs, higher real estate taxes, higher medical insurance premiums and huge jaw dropping bonuses for the bankers on Wall Street. Somehow the government has spun this toxic mix into a CPI which has resulted in fixed income senior citizens getting no increases in their pitiful Social Security payments for two years. You can judge where Ben’s Helicopters have dropped the $2 trillion. Quantitative easing has benefited only Wall Street bankers and the 1% wealthiest Americans. The $1.4 trillion of toxic mortgage backed securities on The Fed’s balance sheet are worth less than $700 billion. How will they unload this toxic waste? The Treasuries they have bought drop in value as interest rates rise. Quantitative easing’s Catch 22 is that it can never be unwound without destroying the Fed and the US economy.
The USD dollar index was at 89 in early 2009. Today, it stands at 79, an 11% decline, which is phenomenal considering that Europe has imploded over this same time frame. Bernanke’s master plan is for the USD to fall and ease the burden of our $14 trillion in debt. He just wants it to fall slowly. Foreigners know what he is doing and are stealthily getting out of their USD positions. This explains much of the rise in gold, silver and commodities. The rise in oil to $91 a barrel will not be a top. The Catch-22 of a declining dollar is that prices of all imported goods go up. If the dollar falls another 10%, the price of oil will rise above $120 a barrel and push the economy back into recession. Then there is the little issue of at what level of printing and debasing the currency does the rest of the world lose its remaining confidence in Ben and the USD.
A few other “minor” issues for 2011 include:
- The imminent collapse of the European Union as Greece, Ireland, Portugal and Spain are effectively bankrupt. Spain is the size of the other three countries combined and has a 20% unemployment rate. The Germans are losing patience with these spendthrift countries. Debt does matter.
- State and local governments were able to put off hard choices for another year, as Washington DC handed out hundreds of billions in pork. California will have a $19 billion budget deficit; Illinois will have a $17 billion budget deficit; New Jersey will have a $10.5 billion budget deficit; New York will have a $9 billion budget deficit. A US Congress filled with Tea Party newcomers will refuse to bailout these spendthrift states. Substantial government employee layoffs are a lock.
- There is a growing probability that China will experience a hard landing as their own quantitative easing has resulted in inflation surging to a 28 month high of 5.1%, with food inflation skyrocketing to 11.7%. Poor families spend up to half of their income on food. Rapidly rising prices severely burden poor people and can spark civil unrest if too many of them can’t afford food.
- The Tea Party members of Congress are likely to cause as much trouble for Republicans as Democrats. If they decide to make a stand on raising the debt ceiling early in 2011, all hell could break loose in the debt and stock markets.
The government’s confidence game is destined to fail due to Catch-22. Will the consensus forecast of a growing economy, rising corporate profits, 10% to 15% stock market gains, 2 million new jobs, and a housing recovery come true in 2011? No it will not. By mid-year confidence in Ben’s master plan will wane. He is trapped in the paradox of Catch-22. When you start hearing about QE3 you’ll know that the gig is up. If Bernanke is foolish enough to propose QE3 you can expect gold, silver and oil to go parabolic. Enjoy 2011. I don’t think Ben Bernanke will.
“That’s some catch, that Catch-22.” -Yossarian