Elginomics

As originally posted on The Elginite:

Locally, there’s been much debate about what roll our city’s government should play in our lives and I’m so glad that the debate is happening.

But with debate, comes disagreement. And while acknowledging the reality of thoroughly opposing and tightly held viewpoints, when it comes to our reasons for being involved, I think all share astonishingly similar goals.

We all want safety for ourselves and our children. We want a welcoming and thriving community for citizens, visitors, and potential future citizens. We want our fellow man to live the healthiest happiest life possible.

In short, we all want peace and prosperity.

And although we all deep down share these goals, I think we’ve lost focus of that fact.

But if we can agree that we want the same end result—to reach the peak of the same mountain—the only real disagreement comes down to deciding what action needs to be taken.

So how do we do it?

The same way we solve any problem. With action based in reason. We look at what works and what doesn’t. We try something and we learn from our mistakes or successes and the mistakes and successes of others, as well.

Of course we’re all fallible. That’s the truth. At times we’re all prone to getting frustrated simply because we disagree on the methods, and as a result we forget about our shared goals.

We discuss why I’m right and why you’re wrong and who said what and that he said she said—when we should be asking “What really makes sense here?”, and “Has this been tried before? How did it work out?” and “am I right?…is she wrong?”

I’m not out to prove that libertarianism, capitalism or any other ism is right because of some bent I have about fairness or because I just dislike what the government does.

I support liberty because I believe there is evidence and logic that suggests that doing so will make us all better off.

Heck—that almost sounds like socialism.

If big government actually led to peace and prosperity, I’d be in favor of it.

In fact, I once was. I supported and voted for Barack Obama. I believed that government could be trusted to manage our economy more efficiently than we could. I believed that it could be done without massive corruption. I believed that he wouldn’t sign a bill allowing for the indefinite detention of American citizens without trial.

I was wrong.

Instead I learned that when people are allowed to peacefully trade with each other without forceful government interference, the percentage of people in poverty plummets over time. I learned that social welfare programs, despite their whole-heartedly good intentions, lead to consistent poverty not less poverty.

I learned that given the opportunity, entrusting politicians with the power to manage our money corrupts—and leads mainly to more power and more corruption through a vicious never ending circle of favors and campaign contributions.

Freedom is not a perfect system, but nor is a big government. Pointing out a disadvantage of freedom in no way proves that it’s not a preferable alternative excessive government—If you’re thirsty and your friend offers you water, do you turn it down because it’s not Gatorade and you’d prefer to stay thirsty?

Doing so would be an exercise in stubborn irrationality.

To those of you that agree with me: don’t respect my opinion. Respect the truth and request the same of others.

To those of you that disagree with me: don’t respect my opinion. Show me the truth and I will do my best listen.

Of course, these discussions haven’t been easy and they won’t be. We all are imperfect humans who don’t like to be
wrong. We stumble and argue about minutiae and get mad. We get off the path of truth seeking and rational debate that leads towards the goals that we all share.

But it doesn’t matter how many times we fall off the path. It matters that we get back on.

Over the past year, I’ve suggested that housing prices would continue to decline, that gold would be a safe haven, that the stock market has not been and will not be a sound investment in the short term, and that the recession would continue without real recovery.

Since the dates of the individual posts linked above:


I will continue to explain my rationale behind any expectations, but in the mean time, I’d like to get a few more opinions and clarifications on the record before the rest of the story unfolds:


Disclaimer: most of my savings are in gold (and silver), so I am biased. I’m not giving investment advice; do your own research and decide for yourself.

When I was a kid, I would always tell my dad how much my favorite baseball cards were worth, basing my valuation on what a magazine said or the prices at the local card shop. My dad would always come back with one phrase that countered my overly optimistic assessment that rings true for more than just baseball cards:

“It’s only worth what someone will pay for it.”

When it comes to real estate & property taxes, this axiom has some sobering implications.

Image credit: Akron News

This week, the “Keybank Center”, a 23-story 475,000 square foot office building in fine condition in prime downtown Cleveland, sold at auction for only $7.15 million.

The building was on the tax rolls with an assessed value of $44 million. That’s a far cry from it’s actual sale price and thus, its actual cash value.

Here in Elgin, we see the same trend in action.

The house directly across the street from mine is selling for about $90,000. It’s the same size and layout as the house I live in, except it’s brick, has a brand new roof, and is on a bigger lot on a corner. The house I live in (the lesser house in terms of quality) sold in 2006 for just north of $210,000.

Over the last year, I’ve watched the sellers slowly reduce their list price from $179,000 to the current one of half that, which has sat for months. Its property tax assessment is listed at about $67,000. However, based on the way Kane County makes assessments, that amount implies a sale value of over $200,000.

The county can only keep up such a disparity for so long before taxes decline to a level that match true housing prices, at which point, our local taxing districts will be in a pinch far beyond what we’ve already experienced in The Great Recession.

Unfortunately, government bodies haven’t been setup to face declining revenues. Pensions need to be paid, a growing student population needs to be educated, and of course we still need police, fire, sewer, water, and pothole-free, snow-free roads.

So, why not just raise rates?

Beyond any issues of over taxation, should taxing bodies decide to raise taxes instead of letting them come down, some houses could even become a net liability as they often do in Detroit. And although several potentially positive parallels have been drawn between Elgin and the Motor City, the potential for a glut of vacant housing is not one of them.

Sound far fetched?

Here’s a house in Elgin that sold for over $167,000 5 years before it sold for $17,259 just a few months ago. When it comes to houses, $17,000 is not that far from $0.

Image credit: zillow.com

The bottom line is this—if we do accept the likely reality of declining revenues and steady needs, we best start cutting and saving now for what looks to be a coming rainy day, before it turns into an oncoming storm.