Cognitive Dissonance and Canada's Real Estate Boom

Yesterday, on Victoria's housing blog, House Hunt Victoria, a real estate agent said:

Wrote 4 unconditional offers over the weekend ranging from 30k to 110k over asking and none accepted. It is brutal out there ...

Phew — as the last patches of snow from last week's storm melt away, the real estate market is so crazy in the capital of British Columbia that an agent not only needs offers above asking, they need offers much, much above asking.

Europe: The Perils of Complacency

Source: The modern typewriter

The UK urgently needs to wean itself off international finance and get back to what it did well 150 years ago, making and selling quality things and services. That will mean an attitudinal revolution in the UK ...

That's a quote from a discussion at the Slog, which prompted some reflection.

One thing the above-quoted remark brought to mind was a cartoon, in the style of the 19th Century Punch Magazine, which seemed to exemplify the thinking of many Europeans during the present moment of financial shock. It portrayed a fat man watching a cricket match on the village green and wearing a look of astonishment at the moment of being struck in the stomach by the ball.

Sadly, I was unable to find the image on the Internet, which raises the interesting though irrelevant question of whether I retain in memory more images than Google has stored on its servers. But Google did provide a link to the image of the sinking Titanic and a note by the Modern Typewriter:

On April 14th, 1912, the RMS Titanic hit an iceberg at 11:40 pm. ... the Captain ordered the lifeboats to start leaving the ship. The passengers were frightened. They thought that leaving such a safe ship into a[n] “unsafe” lifeboat wouldn’t be smart. So they refused to enter the boat[s].

The insistence of some in Europe on clinging to the past, and on assuming that what Europeans did better than the rest of the World 150 years ago they can do better than the rest of the World today with little more than an adjustment in attitude, is reminiscent of the belief of those on the Titanic who apparently thought that if they kept a stiff upper lip and refrained from panic they could stay aboard the warm, comfortable sinking ship indefinitely, without need to brave the cold ocean in a tiny lifeboat.

The question these people need to ask is how can Britons get back to making things, quality or otherwise, when competing with those in Asia and elsewhere who are earning a tenth or less of what UK workers earn?

150 years ago, Britain was the workshop of the world because she had the world’s most advanced industrial technology powered by the World's largest coal industry.

Today, energy is available everywhere and the most advanced technology is moved to wherever labor is cheapest -- and that includes not only factory labor, but much white collar labor including design, software engineering, all kinds of R & D and back office work in financial services, publishing, marketing, etc.

There appear to be only three ways Britain (or any Western nation) can revive its manufacturing sector, these being to: (1) construct a massive tariff wall that excludes cheap products from low wage economies, (2) print massive amounts of money, while keeping a tight lid on nominal wages, thereby driving real wages to the Asian level, or (3) subsidize wages to create a work force that can be employed at internationally competitive rates, i.e., by wealth transfers from the 1% to the 99%.

It seems that the inflationary route (plus mass immigration of third world labor to help drive market wages down) is the route that, without public acknowledgment, has been chosen. To be effective, it will take many years, possibly a decade or two, and it will cause much social conflict in a period during which multinational corporations that can take advantage of opportunities for wage arbitrage continue to reap huge profits by off-shoring production and services.

In the meantime, something like one quarter of the Western world's workforce continue to be treated as so much useless baggage to be kept alive in a demoralized and degraded condition on food stamps or other forms of welfare including residential programmes in prisons and mental hospitals.