Final ...Shankar plan for saving the US Housing sector
Shankar plan for saving the Housing sector / US Economy by – Issuing visas for One million foreign investors who buy US houses for over $250,000 (and up) bringing in over $250 billion in direct revenue and $750 billion in surrounding home value increase leading to over one trillion dollars appreciation in housing.
Background - The Housing sector in the US in 2008 is badly depressed with supply outstripping demand. The sub-prime crisis brought on by financial institutions lending money to prospective owners with less than desirable credit has created a financial meltdown with a record number of foreclosures. Banks, mortgage companies and other financial institutions are averse to being in the real estate business of selling repossessed inventory of housing. They would rather keep the houses in their books at the exaggerated prices that they lent moneys at than the marked down sale value they would realize on a sale of foreclosed property.
Excess inventory in the housing market combined with predatory lending has led to the squeeze in the credit market. Now financial institutions are even reluctant to provide intra-day funds on a short term basis.
Without credit, business freezes up, unemployment shoots up and the economy falls into a recession. This is what is happening to the US right now.
Enter the Federal government – A very large amount of money – close to $700 billion is proposed in a bail out plan. Politicians in the Senate and the House do what is best for themselves and their voting records, and finally pass a plan after much drama and a precipitous loss in value of over 1 trillion dollars in US Stocks and securities.
The American public, both republican and democrat alike place little trust in the government and policies of President George Bush, after the false alarm of WMD raised by him in 2002 and the costly adventure or pyrrhic victory in Iraq. Even though the bailout plan is necessary and critical the public fear that it is mortgaging the future for solving the present day financial crisis. There is also a distrust of government – the Iraq war was in the ordinary American’s mind supposed to lower oil prices, instead prices of fuel sky-rocketed and produced wind-fall profits for Exxon/Mobil and other Big Oil companies. The common man suffered.
The bail-out plan, even though well-constructed was bound to create panic because of the Catch-22 position that the proponents of the Bailout plan found themselves in. For the Congress, and the Senate to vote in favor of the bill in an election year, more banks and financial institutions had to fail. The President had to come out and say, “If you don’t vote for the bill, there will be a recession and grave consequences.” In a way, Paulson, Bernanke and Bush had to wait for a Financial Pearl Harbor to happen. And that is precisely what happened…A Financial Pearl Harbor hit Wall Street and Main Street.
Senators and Congressmen make decisions more on what will get them reelected rather then what is good for the country. Here the fault does not lie entirely with the politicians but the public that gets its information from talking heads on TV. For example the Democratic Primary TV debates or the Presidential debates with one minute responses just do not give time for profound answers. “Did you vote for the Iraq War?” The candidate barely gets past ,”Yes but…” And the mediator moves onto the next question.
After this charade, a couple of pompous idiots dissect the one minute response with their own spin on it. Then there are instant polls being taken in a game show format.
401 K, IRAs and pension funds have seen rapid depletion in value. The average American has become poorer and might have to work into his seventies or even early eighties due to his private retirement funds being halved. The average citizen can not also reliably count on the Federal social security and Medicare funds being available over the next twenty to thirty years.
These are hard times and call for innovative thinking and a clear call to action. The Shankar plan that will be unveiled in a forthcoming blog entry will show the way to coming out of the housing crisis and herald a bright economic future after making its arguments and assumptions.
Immigration patterns to the US over the years
First wave
In the early days after Christopher Columbus discovered the New World, a wave of English settlers descended upon the US. Obviously the Native Indians had no immigration policy or custom officials in place to deal with this Caucasian Immigration wave. The new Immigrants brought in their raw energy, guns and other sundry weapons, work ethics, salesmanship and English cunning. Since the gun and cannon are more powerful than the bow and the arrow, the new Immigrants could quickly obliterate the Native Americans.
About salesmanship: the British were able to buy Manhattan from the Native Americans for a couple of beads, a looking mirror and about twenty bucks.
The English also boozed up the locals and gifted them blankets with smallpox, an European disease.
Anyways we might conclude that the first immigrants were cunning, well-armed merchants. The country prospered.
The second wave came with a flood of folks escaping religious persecution, hunger, famine, drought. Basically Europe had got too over-crowded for that many people and so they had started killing each other in the European continent. These folks worked their hearts out but were not basically the best and brightest of their cities and towns. They had an excellent work ethic and worked with their hands tilling the soil or making furniture or laying roads and improvising mechanical things. They might have had quaint habits and were not as genteel as the European counterpart. However the great labor of these hardworking immigrants opened up America. Plus they had the basic knowhow from Europe of Science and Engineering. These were German folks and Dutch folks and French people. None of these guys and girls had any great education. It is doubtful if these folks even went to school.
The third wave from Africa:
After that some of the rich White folks wanted to stop working and still make money. Now they looked around to see how they could achieve their goals - They could ofcourse have enslaved a few of their own unfortunate Caucasian brethren. Remember, by now most of the Native Americans had been killed by way of genocide.
At about this time Arab traders had sunk to the lowest depths of humanity and were cutting deals with plantation brokers to bring human beings from Africa as slaves.
The Plymouth rock landed on these poor guys and girls from Africa pretty hard.Cotton and other crops grew in plenty with this huge, unpaid labor.
Fourth wave
The second World war brought in a rich haul of folks escaping Nazi persecution. These immigrants included world class scientists and engineers including Albert Einstein, one of the top minds in the history of mankind. THat put the US of A over the top - all that talent.
Fifth wave
About 1960 or so, a Bill was signed to encourage racial diversity and immigration from countries other than Europe. It first started out as a trickle from India, China, Far East, Middle East and other African countries. The early folks from these countries pretty much received Green cards on coming over. After that students came from these countries, completed their studies and stayed on to make a living.
From the eighties onwards, companies brought in specialized professionals on a H1 visa and L1 visa.
These professionals largely helped speed up the technological advances of USA and helped the country innovate with products in the field of computers, medical engineering, telecommunication, biology, medicine and almost every sector of high technology/the larger US economy.
There was no large-scale resentment from the general population of these technology immigrants because they were adding value to the economy. Certain groups of people and Interest groups saw this new wave as Labor arbitrage or a downward pressure by company owners on US worker salaries.
However, by 1995,many departments shifted lock stock and barrel to India, China and Phillipines leading to a phenomenon called outsourcing. This lead to a decrease in immigrant spend within the US and a loss in Intellectual property. What is good for India and China might not be good for the US for after all even with the global economy, all wealth is still localized. Average salaries in India and China went up and so did the number of professionals in their work-forces. Corporate greed,with zero social responsibility and CEO salaries linked to shareholder perception lead to company executives essentially laying off entire departments. Jobs and careers were shipped off offshore or Bangalored or Shangaied.
Seventh wave.
Over the last fifty years or so, Immigrants from less prosperous countries have come over by boats, border crossing, and even over the North pole to make a living in the US. There is about 15 to 20 million folks living without permits. They are described as 'illegal alien' by the government - illegal refers to some one breaking the law and alien refers to people from hostile or perverse cultures or people from other planets or even creatures outside the solar system. Despite the derogatory treatment meted out to them and the only chance to legalize being a random lottery conducted every 25 years, illegal immigrants still keep coming.
Obviously there are pros and cons of this large labor force. One is that the ordinary American citizen is able to buy services at a lower price directly or indirectly..Farm goods, milk, diary are mostly produced by these Illegal workers supervised by a local American owner with papers.
A huge percentage of house and building construction, landscaping and road building is performed by Illegal workers. Without them the median price of a house would shoot up by 33% to 55%.
You might think of the pool of illegal workers as the Walmart of the services industry.
The cons or disadvantages of this illegal, undocumented workforce is that they do not pay a dime in taxes to the Federal or state government. There is hence severe pressure on health and educational services. Since they are undocumented, it is tough for Law Enforcement to get a handle on Law and Order. They have also increased competition for jobs and decreased average salaries for US workers.
The Housing visa proposal:
The New Mantra for the US is 'Sell Baby Sell' The US has to offer a compelling value proposition for people to come here. Some of the selling points in the housing visa plan are:
Relatively Clean air and environment
English is spoken throughout the US
Less bureaucracy in opening businesses
Large house for your money
Running water - 24 hours
No power cuts
Free K-12 education for your kids
Property rights ensured - in general no double or triple pattas (house documents), etcetera in the US
Law and order - Good except for minority baiting by LAPD and some other rogue police departments. The normally abusive, Belligerent, insulting Immigration, consulate and customs officials would have to be seriously retrained. (I will try to cover voice training, manners training and smile training for Immigration, Consulate and Customs clerks in a seperate piece - Beyond scope)
Net effect on the economy:
1 million Housing visas/Green cards multiplied by $250,000 = $250 billion.
Estimated increase in surrounding housing value = $750 billion
Legal fees for US Attorneys = $5000
Total Legal fees = 1 million multiplied by $5000 = $5 billion
Housing upgrades for purchased houses = 1 million into $20,000 = $20 billion
Travel spend per family = 1 million into $5000 = $ 5 billion
First year domestic expense spend = 1 million into $10,000 = $10 billion
Total value is in excess of a trillion dollars .
I also suggest a semi-legalization program for the nation's illegal immigrants.
I suggest a $100,000 investment program since these immigrants have less money to invest.
Potential Income 20 million undocumented people multiplied by $100,000 = $two trillion
Total of two programs - Over Three trillion dollars!!!
Points to be considered
New immigrants should be freely able to conduct legal business
Domestic security concerns are paramount
Quota system by country
No unemployment benefits for five years - otherwise plan is counter-productive
Note- Please add your valuable feedback/comments to my housing visa plan. It needs to be refined.
To be continued…
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Posted at 09:31PM Oct 04, 2008 by ravi in General | Comments[0]