Tuesday, October 11, 2005

Kunstler the Hustler

James Howard Kunstler, one of the two most curmudegeonly net denizens known is at it again. This time he is preaching to the choir: http://www.kunstler.com/spch_petrocollapse.html

Kunstler's one note blanket condemnation of the Grand Cotean Dystopia is getting boring. The prediction is always the same; some long ignored fatal flaw in the American Lifestyle is going to rise up and smack us silly. Which fatal flaw he picks depends arbitrarially on the time and place. Of course for a "petrocollapse" summit the flaw would be his claim of energy dependence of the suburbs. In the past decades it has been any number of other things and there's little doubt that if he were invited to a "finalcialcollapse" summit it would surely be the housing bubble that will bring us down.

Knustler viscerally hates many aspects of modern American development patterns but rather than discuss those characteristics he chooses instead to blanket attack the lifestyle choices of people who have been as uniformly correct all these years as he has been wrong. $5 gas isn't going to send the masses back to the ghettos. The difference between $3 and $5 gas is like $1200/year. Painful but still only the difference between an $1800 an $1920 mortgage. People do this housing math all the time and decide to locate away from the CBD where their $1800 gets more QoL than close in and a $1920 mortgage would buy. It isn't the -amount- of transportation or even just energy the suburbs consume but the total cost. Those costs are measured in money -and- BTUs -and- time. $5 gasoline will decimate transit and temporailly inhibit POV mobility. Transit use falls in tough economies and $5 gas will not help the economy.

Inflation especially hurts transit. As the costs of $5 gas as passed on this will disproportionately impact transit which typically has costs outpacing inflation by 3-4 times. Public funding will also dry up in a poor economic environment where people are unwilling to vote for more taxes. Over time $5 gas will shift POV choice to models that have lower operating costs and generate lower fuel taxes thus widening the gap beteen POVs and transit for those with a choice. Those with choice in transportation are the same who exercise choice in residence location. Those more efficient vehicles will still need the same infrastructure thus the smaller Highway Trust Fund money will increasingly go more to roads and less to transit subsidies. The consequences are obvious, $5 gasoline will decimate transit.

Oh, and an unobvious counterpoint; transit saw its' highest usage in 40 years at exactly the same time gasoline was at its' lowest inflation adjusted price ever. Real transit advocates should be pushing for cheap gas but their emotional desire to punish autos in a misguided belief in a zero sum game and will instead continue to shoot themselves in the foot. As to the housing bubble; The housing bubble is a good thing. It is a voluntary mechanism to raise municipal revenues and assures more efficient use of existing housing stock thus reducing sprawl and stimulating the economy. Besides regular people are not hurt when the bubble bursts, speculative investors and people who make poor housing decisions are hurt.

Take my county, May prices are only 16.8% year over year higher. Quite a "cooling" from the more recent 25% each of the previous 4 years. But that's only 900 (less than 1%) homes in the last year. All the rest of the homes are looking at being worth 40%-600% more than their purchase prices. A 20% even 30% pop only theoretically hurts a few hundred and only if they cannot wait before selling in the meantime they are supposedly enjoying a home they were happy to purchase for the same price so they are still whole. The people most at risk are ARMs holders and the public transportationreliant. These and other unusual and risky financial instruments are disproportionately being used in places with high costs and generally high congestion and transit use. Not a correlation or causation just an association.

When the ARMs start twisting it is the cenurbs that will see the greatest impact not the exurbs. Transit costs typically increase much faster than general inflation and marginal ridership decreases in poor economies. $5 gas is a triple hit to transit ridership; higher costs, higher marginal costs, fewer riders. What this means is that Kunstler has the entire end of suburbia as we know it exactly wrong. Higher energy prices will spur new energy efficient construction and demand for less congested (more) freeways and erode support for the cenurbs as jobs move to where the people live not vice versa.

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