Always look on the bright side … or else (dee doo): Part 2, anything but journalism these days

May 26, 2016 | Argentina, Capital markets, China, Economics, Exchange rates, Global news, Government, Housing, Speculation, Statistics | No comments 137 views

[Continued from yesterday’s Part 1.]


By: David A. Smith


If life seems jolly rotten
There’s something you’ve forgotten
And that’s to laugh and smile and dance and sing.

Yesterday’s post conjoined the odd couple of Xi Jinping, president of China, and Graciela Bavacqua, at the time Argentina’s chief statistician, around the subject of the integrity (or lack thereof) of economic statistics, using as source material the Wall Street Journal (May 3, 2016) and Significance, December, 2012; Albiceleste font):


Beijing has moved to reassert control of the country’s economic story line after policy stumbles that contributed to selloffs in China’s stock markets and its currency last year –


If one cannot control the news, one can always retreat into seeking to control only the blame.


– fed doubts among investors about the government’s ability to navigate the slowdown.



At least we’re on the highway


Pressured by financial regulators bent on stabilizing the market, stock analysts at brokerage firms are becoming wary of issuing critical reports on listed companies.


As George Orwell would have agreed, along with suppressing bad news is the importance of suppressing the news of suppression.



He sees too clearly and speaks too plainly


While evidence of the clampdown is anecdotal –


Of course it’s anecdotal – statistics are being suppressed, so there is nothing left but anecdote.


– it appears widespread.


The reason for pushing a false narrative is both self-evident and self-interested.


During the past two months, the Communist Party leadership has been talking up the economy to try to reassure global markets.


China needs people to keep buying its paper and not selling anything, or there may be an accelerating downward price spiral.


If the rubes are foolish enough to believe it, probably runs the thinking, then they deserve it, don’t they?


When you’re feeling in the dumps
Don’t be silly chumps
Just purse your lips and whistle – that’s the thing.


At any rate, that was the philosophy in Argentina:


From the start Graciela Bevacqua was part of the staff responsible for the calculation of the Consumer Price Index (CPI), the fundamental measure of inflation.


In 1994 she was promoted to Associate Director of the CPI group of INDEC, and in 2002 stepped into the role of Director, filling a leadership void. “The promotion did not become official until 2005, when the then President Nestor Kirchner named me Director by decree. This was a rewarding time, not only because the promotion almost doubled my salary but also because it represented a recognition of my efforts over the several years during which I acted as Director with all the responsibilities but none of the benefits of the position.”



Ms. Bevacqua at home, after her firing


Naturally, moves to squash facts scare off the foreigners, because the foreigners not only have capital optionality, they also have freedom of information. 


Some lower-level government officials describe a siege mentality that took hold among Chinese leaders and senior officials as international financiers like George Soros expressed gloom about the economic outlook early this year.


Apart from Mr. Soros’ politics, his nose for the opportunity to short has always been sensitive.



Yes, it’s as sensitive as Pierpont Morgan’s was


This message control risks further constraining information about the world’s second-largest economy, thereby deepening the anxieties of investors who already doubt the reliability of official statistics and statements.


But censorship is never about changing the foreigners’ minds; it’s aimed inward, at our own populace.  So this analysis, though true, is largely irrelevant:


“Vigorous debate among economists and public confidence in this conversation is critical if China is to successfully navigate the choppy economic waters,” said Scott Kennedy, a deputy director at the Center for Strategic and International Studies, a Washington think tank. “If the party and government only want to hear good news, then they’d be better off hearing nothing because the value of the words would be less than zero.”



Do I look like I’m delivering good news about China?


That all depends on what China’s leadership’s objective is.


At high-level meetings the past few months in the walled Zhongnanhai compound where the leaders work, some senior officials called for quashing any criticism that might encourage foreigners to “short China”—or bet against the prospects for growth—officials with knowledge of the discussions say.



Come no closer


For President XI, confidence in China’s economy is an article of faith, and unbelievers are apostates who must be reminded of the way of light:


Early this year, President Xi visited the country’s three big state news organizations—Xinhua, the People’s Daily and China Central Television—to lecture them on the need to toe the party line, “tell China’s stories well” and enhance the nation’s influence in the world.



Remember the penalties for apostasy


For life is quite absurd
And death’s the final word
You must always face the curtain with a bow.
Forget about your sin – give the audience a grin
Enjoy it – it’s your last chance anyhow.


Aside from the intimidation element, that has to imply President Xi is badly worried.


Why did she take her stand? “The only thing I don’t want to lose is my prestige and credibility”, she says.  “If I stop now [2012] it would be like admitting that they are right and my fight over the past four years has been in vain.”


A ruler worried about a country’s economy would have to leave its television journalists likewise worried.


That, Chinese journalists said, has resulted in pressure not only to stay away from critical topics but to produce positive stories about the economy. Reporters covering the country’s stock markets, for example, have been told to focus their reports largely on the official statements issued by the China Securities Regulatory Commission, the stock market regulator, according to Chinese journalists.


In other words, pay no attention to the men behind the curtain.


So always look on the bright side of death
Just before you draw your terminal breath



Look for the silver lining


“As a Chinese reporter, you can do anything but journalism these days,” said a senior editor at a state-owned media outlet.  


Print all the lies that fit?


One colleague, the editor said, was forced by the outlet to take a leave of absence over what senior editors considered the reporter’s aggressive investigation into the causes of last summer’s stock market crash.



Now you’ve been warned twice, Ms. Lin


Lin Caiyi, chief economist at Guotai Junan Securities Co. who has been outspoken about rising corporate debt, a glut of housing and the weakening Chinese currency, received a warning in recent weeks, officials and commentators said.  It was her second.


The point of message pressure is not to change belief, merely to change what is vocalized. 


Professionally, Graciela was compelled to trim the list of businesses from which INDEC took price samples.


“The demands from Moreno were daily.  He challenged our data, our methodology and our results. Phone calls from Moreno were 40-minute-long shouting demands, asking for information to which, by law, neither he nor his office had any right. There was no stopping his bullying; even the Minister of Economics, who outranked Moreno, was cowed into serving as the go-between between Moreno and INDEC.”


A coordinated strategy of emphasis can intimidate.



Have I made myself clear?


The first came from the securities regulator, and the later one, these people said, from her state-owned firm’s compliance department, which instructed her to avoid making overly bearish remarks about the economy, particularly the currency.


The goal is not so much a chorus as a silence.



There’s authority and there’s economics, and you have to pick your side


That sort of squelching worked, at least in terms of controlling the narrative, in pre-information-era societies, when the Party could control all the news.  As George Orwell, who dedicated his life to using truth in service of decency and whom I so often quote because his language is so clear and plain, distilled it via Winston’s tender torturer O’Brien:


O’Brien was looking down at him speculatively. More than ever he had the air of a teacher taking pains with a wayward but promising child.


‘There is a Party slogan dealing with the control of the past,’ he said. ‘Repeat it, if you please.’


‘“Who controls the past controls the future: who controls the present controls the past,”’ repeated Winston obediently.



Who controls the present controls the past


The industrial era was the apex of dictatorships, because the means of communication – newspapers and radio – could be concentrated in a few hands, and the means of warfare – factories – could operate on strictly hierarchical lines.  In an era of global capital and global communications, the monopoly on information is broken, and that dramatically shortens the lifespan of dictatorships. 


[Continued tomorrow in Part 3.]

Always look on the bright side … or else (dee doo): Part 1, Gloomy views and positive energy

May 25, 2016 | Argentina, Capital markets, China, Economics, Exchange rates, Global news, Government, Housing, Speculation, Statistics | No comments 123 views

 By: David A. Smith


Some things in life are bad
They can really make you mad
Other things just make you swear and curse.


Some things in life are really bad


Some decades ago, back when hand-held calculators were the rage of high-tech, a team of psychologists interested in people’s deference to presumed technical authority invited their subjects to take what they were told was a test of their mathematical aptitude.  For this they were given a calculator the researchers had modified so that while its first few computations would be accurate, after a bit they would be wrong – with gradually increasing errors.  The researchers were unsurprised, as I am confident AHI blog readers will be unsurprised, that for people to question the calculator required absurd errors, the equivalent of 2+2 = 937. 



For high values of 19 and low values of 21


That, as reported in the Wall Street Journal (May 3, 2016), is the Groucho-Marx position that both global and Chinese analysts now find themselves when seeking understanding of what in fact is occurring with China’s economy, capital flows, and financial sector, which I will juxtapose with an article from 3½ years earlier, from now-reforming and then-obstructing Argentina, published in Significance, the monthly journal of the Royal Statistical Society (December, 2012; Albiceleste font). 


“In 1984 I joined INDEC, the Instituto Nacional de Estadística y Censos – the government’s national institute for statistics and the census. At first I was there as an independent contractor; I had imagined it would be a short-term position but, apart from two and a half years away raising my three children (the youngest is now 20, the oldest 24), I ended up staying there until 2007, when I was forced out.”



An unlikely and reluctant heroine


In 2012, when the Significance piece was published, Cristina Fernandez de Kirchner was aggressively defaulting her country’s sovereign bond obligations and pressuring investors to take whatever she felt like promising them – and statistician Graciela Bevacqua was herself being pressured, threatened, and prosecuted, for just the sort of thing that China’s leaders are now trying to suppress. 


Beijing – Chinese authorities are training their sights on a new set of targets: economists, analysts and business reporters with gloomy views on the country’s economy.


I‘ve already documented at length that Chinese production statistics are dubious;


Local leaders are given GDP growth targets. Not so coincidentally, as a working paper by Zhang et al. shows, almost every provincial leader beats those targets. Below, a dramatic jump is seen at the target growth rate. Very few provinces report growth below the target, while many provinces report growth just above the target line. This pattern could be the result of “real” improvements in the economy. Alternatively, it could be the result of bureaucrats manipulating — or “juking” — the stats.

[Hey, Fannie Mae did it and look how they’re doing – oh, wait  Ed.]


It’s also manifestly clear that real estate development is a vertically integrated stack of state-owned enterprises all of which are motivated to pump up inflated and unreal prices; that as far as I can tell, the money supply is out of control; and that capital is fleeing the country at unprecedented rates. 



The truth is in the smog somewhere


As more citizens try to take money out of the country, officials say, regulators and censors are trying to foster an environment of what party officials have dubbed “zhengnengliang,” or “positive energy.”


Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter.


It’s a grim forecast – as, indeed, the Economist noted this week in its cover story. I think the leadership fears it is losing control of the peoples’ narrative.


“The initial goal was to get into the 2007 presidential elections without acknowledging the actual inflation rates”, Victor Beker, former Director of Economic Statistics at INDEC from 1984 to 1987, said in an interview with Bloomberg in May 2011. “From that point forward, reporting the real inflation would have shown that the official statistics had been previously manipulated.”



Just get Cristina elected without inconvenient truths


The power-hungry always want just to get around the next corner, so they will always want to dictate the narrative and censor non-conforming narrative.


The stepped-up censorship, many inside and outside the ruling Communist Party say, represents an effort by China’s leadership to quell growing concerns about the country’s economic prospects as it experiences a prolonged slowdown in growth.


While in China the truth is slowing economic growth, in Argentina it was runaway inflation, so whereas China wants to pump up its figures, Argentina wanted Graciela and INDEC to tamp theirs down:


“In hindsight, it is now apparent that problems began as early as 2005, when a newly appointed Minister of Economics [Guillermo Moreno] began questioning the CPI figures, saying we were unpatriotic.”


A Minister of Economics need not be an economist.



The only think I count is votes, and I decide how much they count


“He told us that the patriotic thing to do was to report a low CPI (or at least a CPI that was on a downward trend) and that it was the duty of INDEC to cooperate with the government to make sure that the CPI would be ‘favourable’. Then he proceeded to demand the list of businesses from which INDEC obtained the pricing information from which we calculate the CPI. This was something that clearly violated the law that establishes confidentiality to providers of data to INDEC and other statistical agencies.”



Don’t grumble, give a whistle


When you’re chewing on life’s gristle
Don’t grumble, give a whistle
And this’ll help things turn out for the best.


In medieval times rulers could entirely control the narrative – among illiteracy, lack of printing presses, unreliable communication between towns, and the power of religious dogma, the aristocracy could be reasonably assured of sustaining a message across a kingdom. 


AHI posts on China’s urbanization and capital


August 23, 2010: Gleefully running up the debts, 2 parts, SOEs and development

October 28, 2011: A little learning is a dangerous thing, 2 parts, hukou and schools

July 29, 2012: I’m shocked, shocked, kickbacks in property development

August 23, 2012: China’s cities and housing: “Nothing outside China matters”

August 25, 2012: China’s cities and housing: “Imperial economy is successful society”

August 26, 2012: Suburb stuffing, 2 parts, new ghost high-rise townks

September 17, 2012: China’s cities and housing: “Between observation and doctrine, report doctrine”

July 22, 2013: China’s runaway money train, 4 parts

December 16, 2013: Formula for an instant slum, 5 parts

September 19, 2014: Where the money goes, people will follow, 3 parts

February 1, 2016: Yuan to buy American housing?, 4 parts


By the industrial age, with the broadsheet, city, and railway, information traveled fast, and while a liberal government would lose control of the narrative (as England did to Gandhi from time to time), the tighter the dictatorship, the better able it was to keep the official story the only one.


While restrictions on foreign media have always been tight, they are becoming tighter; a growing list of foreign publications have had their websites blocked from view within China, including The Wall Street Journal.


In the twenty-first century, it’s hard to see how anyone can dictate the story.


Private estimates of inflation began to diverge from Argentina’s official inflation statistics from January 2007, when Bevacqua was sacked.  



How the Economist made its view known


In February this year [2012], The Economist took the unprecedented step of refusing to include Argentina’s official figures in its monthly summaries of the world’s economies. Its editorial said: “Since 2007 Argentina’s government has published inflation figures that almost nobody believes…. From this week, we [The Economist] have decided to drop INDEC’s figures entirely. We are tired of being an unwilling party to what appears to be a deliberate attempt to deceive voters and swindle investors.”


Of course, because these were only statistics, the Economist’s boycott made scarcely a ripple in the press, by contrast with the hedge funds who took all the flak (and did all the hard work).  Regardless, with global media, functionally infinite broadband, and handheld texting, banning offending content is like whack-a-mole.



But they keep popping up


In the past, while commentary about the economy and reporting on business has been left relatively unfettered in a tacit acknowledgment that a freer flow of information serves economic vitality, Chinese authorities have targeted mainly political dissidents.


It’s always easier to suppress political dissent than economic dissent:


A broad-ranging tightening of controls on society has been under way in recent years as President Xi Jinping tries to gird the party and build public support for a rocky economic transition after decades of growth. Targets thus far have included activist lawyers, social media personalities, foreign nonprofit groups and party members who criticize policies.


Economic dogma, you see, is challenged every day and in every purchase.


Always look on the bright side of life (dee doo)
Always look on the light side of life (dee doo)



[Continued tomorrow in Part 2.]

Month in Review, March, 2016: Part 2, Two tales of two countries

May 24, 2016 | Argentina, Capital markets, China, Democracy, Global news, Government, Rent control, Rental, San Francisco, Sovereign bankruptcy, Zoning | No comments 178 views

By: David A. Smith

 [Continued from yesterday’s Part 1.]


As we saw in yesterday’s Part 1, in complex systems like cities, government, and housing, success looks easy only after the fact, and invites tinkering with the finely balanced elements of that success.



See?  Nothing to it!


Indeed, many there are who believe that bounty exists for their personal deployment, and who are then infuriated when the bounty disappears, such as Kristina Fernandez de Kirchner, Argentina’s erstwhile President whose eight year run to ruin only recently came to an end (in part because of the unthanked self-interest of financial investors) because she never listened to The rime of the Argent manager: Part 1, Now wherefore stopp’st thou me?:



“Why blogg’st thou me?” asks the helpless reader, paralyzed from clicking away


Argument: Driven by storms to the cold Country


At the very end of February occurred a remarkable event, reported erroneously in The New York Times (February 29, 2016):


Argentina has agreed to pay $4.65 billion to four hedge funds in a deal that could put an end to more than a decade of mudslinging and legal attacks that had cut the country off from global financial markets.


Though the Times’s phrasing is not actually false, it so jumbles effect and cause, martyring the perpetrator and smearing the righteous, that I will largely set it aside as a source of analysis, in favor of the measured accuracy of the Economist (print issue of March 5, 2016):


A deal with holdout bondholders is expensive, but worth it


Penance is seldom cheap.


“This is the equivalent of a giant albatross being lifted from Argentina’s neck,” said Brett Diment, the head of emerging market debt at Aberdeen Asset Management.


And that phrase took me back, and back, and back … to the original albatross.


Argentina’s capital-markets ostracism, like the Mariner’s albatross, was inflicted in vengeance for a callous act of aggression, in Argentina’s case the unilateral default on its obligations, reported in Part 2, And I had done a hellish thing,


With its currency pegged to the dollar and the Brazilian real floating (depreciating) and thus becoming much more competitive, Argentina’s economy stagnated into a Greece-like permanent-deficit. 


Previous AHI posts on Argentina’s defaulted bonds


November 13, 2012: Epic CAC

November 27, 2012: CAC-handed

February 19, 2013: Dictatorship is uneconomic

July 11, 2014: International law’s Tinkerbell moment 2 parts


Part III: I shot the albatross


That led to a bank run (sound familiar, Europe?, then a nationwide freeze on capital (the Corralito; sound familiar, Cyprus?), and a fiscal crisis – including defaulting on $93 billion of sovereign loans.


As always happens with sinking borrowers (whether Greece, Jefferson County, AL, or Puerto Rico), as the debtor’s fortunes dropped, many initial investors sold out at a loss to more risk-tolerant buyers, many of them hedge funds. 



“Pricing in anticipated default”


When Argentina defaulted, it was facing creditors ready for default and ready to collect on their collateral anyhow:


In December 2001, the Argentine government, facing economic collapse, ceased paying its external debt.  NML Capital, Ltd. (NML), a holder of Argentine bonds, filed suit in the Southern District of New York to collect on its bonds.


Though merely a district court, the Southern District of New York is globally famous, as it’s the court for Wall Street, and therefore the court for US capital markets. 


The New York court’s judgment knocked Argentina out of US markets, and gave the claimants a bounty license to pursue Argentinian assets anywhere in the world, which they did with comic effect and impressive financial consequences, covered in Part 3, Nor any drop to drink, Part 4, And I blessed them unaware, resulting eventually in Cristina’s loss in the 2015 elections and the ascendancy of a reformer who does understand, reported in Part 5, To him my tale I teach:


As yesterday’s post ended, the Argent ship of state had replaced its economically mad captain, charted a course back to the more temperature political climes, and repented (legislatively, anyhow) of its previous seizures.


The previous holders of those bonds had sold them in despair, after Argentina had defaulted on the bonds and told its creditors it would only pay a deeply discounted recovery. 


Once the laws have been scrapped, the government hopes to raise up to $15 billion through a bond issue, which it will use to pay the creditors. Some analysts doubt that the market can absorb such a large sum. But Argentina’s finance secretary, Luis Caputo, is bullish. “All the banks we’ve spoken with are confident that we can raise the money we need in the market,” he said.


Though Ms. Kirchner Fernandez never understood the connection, others did, and fortunately one of them is now Argentina’s president:


[President Macri] attacked the Kirchner administration for refusing to settle the issue, adding that by letting the dispute fester, interest had accumulated and investors had lost confidence.



“I am silently condemning you.”

“No, I am silently condemning you.”


“This is a giant step forward in this long-running litigation,” Daniel A. Pollack, the court-appointed mediator, said on Monday, adding that Argentina’s decision to settle was “nothing short of heroic”.


Pace the Times, the investors weren’t contesting the government’s debt obligations, they were contesting the government’s unilateral cancellation of its own obligations, which cancellation it kept rationalizing with ex post facto laws:


The injunction will not be lifted until Argentina repeals two laws that block agreements with the holdouts.


[1] The Ley Cerrojo (Padlock Law), enacted in 2005 during the first round of debt restructuring, was intended to prevent Argentina from offering holdouts a better deal than that accepted by holders of restructured bonds.


[2] The Ley de Pago Soberano (Sovereign Payment Law) of 2014 was a failed attempt to circumvent Mr Griesa’s injunction by re-routing payments to bondholders who had accepted a deal through Argentina or France.


Evidently the Times deserves to be buttonholed like the Mariner’s wedding-guest.


If Argentina’s present is the beginning of recovery, it may well be that Argentina’s recent past is in fact Chain’s future:


AHI posts on China’s urbanization and capital


August 23, 2010: Gleefully running up the debts, 2 parts, SOEs and development

October 28, 2011: A little learning is a dangerous thing, 2 parts, hukou and schools

July 29, 2012: I’m shocked, shocked, kickbacks in property development

August 23, 2012: China’s cities and housing: “Nothing outside China matters”

August 25, 2012: China’s cities and housing: “Imperial economy is successful society”

August 26, 2012: Suburb stuffing, 2 parts, new ghost high-rise townks

September 17, 2012: China’s cities and housing: “Between observation and doctrine, report doctrine”

July 22, 2013: China’s runaway money train, 4 parts

December 16, 2013: Formula for an instant slum, 5 parts

September 19, 2014: Where the money goes, people will follow, 3 parts

February 1, 2016: Yuan to buy American housing?, 4 parts


To judge by China’s recent suppression of news, we may be seeing the early stages of The fall of China Mae: Part 1, Choose any number that fits:


When they start lying about economic data, short them.

– Smith’s Rule of Emerging-Market Investment

(Written March, 2016, backdated to June, 2007)



It looks so straightforward in hindsight


In January, 2008, I wrote a two-part blog post, Who’s next?, suggesting that Fannie Mae was overextended and due for a market correction. Though I believed my own prophecy, I never acted on it, because it was (at the time) not merely contrarian but virtually unthinkable.


Sources used in this post


YouTube video of CSIS February 2015 symposium

Ms. Stevenson-Yang at 3:00-28:15, 51:45-57:45, 1:08:30-1:10:45, 1:16:40-1:19:00

The New York Times (3 November 2015

Wall Street Journal (January 28, 2016; orange font)

The New York Times (25 February 2016)


In September, 2012, after four or five years of intermittently posting on China, I concluded a six-part on China’s urbanization and housing with the penultimate installment Between observation and doctrine, report doctrine:



Three premises that are breaking down (published September, 2012)


That approach is applicable in China today, where news about the economy is treated as a state secret, and propaganda is the only truth permitted, so that Part 2, Data disappears when it becomes negative, and Part 3, Everybody laughs at the official statistics:


China’s capitalism has been corrupt from inception; the symbiosis among state-owned banks, state-owned development companies, and municipalities profiting from high-rise land development.  The evidence for is so massive that it may be regarded as completely proven.




As Anne Stevenson-Yang perceptively spotted, China’s rush to urbanization, fueled by state-owned enterprises developing property for their own financial liquidity, has destroyed China’s rural cryptobiotica. 


The newly disenfranchised are now rootless, botanically and economically, and that can make them a mobile mass for a demagogue.




Whenever I write about imminent failure, I feel Cassandra’s ethical dilemma: on the one hand, I would like them to heed my advice, while on the other I am so narcissistically furious they are ignoring it I almost wish them to get smacked by reality.


Corruption is a double-edged sword: to make money in China, you must become corrupt because you engage with corrupt elected and appointed officials, but if the wheel turns then they expose your corruption to conceal theirs.


That has echoes of Fannie Mae, which contributed politically to the campaign of more 85% of the Members of Congress, all of whom came to see it as mom and apple pie.



What, us worry?


When that happens, you take your money out of the country, in anticipation of taking yourselves out of the country.


And yourselves, dear readers, out of this blog post and back to work.


AHI posts on global financial markets


June 26, 2006: Fannie Mae, the implied story, 7 parts, HUD OFA report

June 30, 2006: Part 5, Smoothing earnings with financial tricks, Gaming earnings

January 22, 2008: Who’s next?, 2 parts, Fannie Mae’s thin capital ratios

May 6, 2008: Catastrophe is a precondition to fundamental reform, 2 parts, US meltdown

December 4, 2012: Innumeracy precedes insolvency, 4 parts, San Bernardino bankrupt

October 7, 2013: The demise of deposit insurance, Russia investing in Cyprus

September 3, 2015: House and country, 9 parts, Russian oligarchs buying London



Month in Review, March, 2016: Part 1, Two tales of two cities

May 23, 2016 | Argentina, Capital markets, China, Democracy, Global news, Government, Rent control, Rental, San Francisco, Sovereign bankruptcy, Zoning | No comments 148 views

By: David A. Smith

Before human beings had nations, cities were the dominant political unit, and it was through cities that momentous change came to the world – so we say Athens and think philosophy, Rome and empire, Florence and the Renaissance. 



Inventing a Renaissance within the city’s walls


Because cities are defined as places where strangers live companionably in close proximity to one another, cities depend on both successful housing and successful municipal budgeting – two themes I regularly examine on the blog, as in March when I looked first at a city that was failing the budget side, leading to its residents to conclude they would be better off Opting out of micro-government: Part 5, This time they have the votes:


In the earlier parts of this rural-pace-of-life post about the deorganization of towns in forested northern Maine, I covered the forces that build up a political-economic gravity that makes sustaining public services difficult, and that invites the question, what tips it over?



I have no idea how it happened


Sources used in this post


Washington Post (March 28, 2004; Lavender font)

Bangor Daily News (October 2, 2013; navy blue font)

Bangor Daily News (July 31, 2015; brown font)

Bangor Daily News (November 27, 2015; buff blue font).

The New York Times (January 16, 2016); the story of Cary Plantation, Maine

Wikipedia, Bancroft, Maine (accessed February 21, 2016; Kelly green font)


2. Why does a municipality de-organize?


Boiled down to its essence, the answer is simple: To save money and improve service.


“[A deorganized township is] basically like a company: There’s so much less overhead,” said Paul G. Bernier, the public works director for Aroostook County, who is responsible for overseeing services to the unorganized territories at the very top of Maine.


Remember, all of Aroostook County has 70,000 people total. 


“Sometimes it’s half of what they were paying.”


The tipping point came, as it so often does, when people could no longer afford the status quo’s costs.




At some point, the town itself becomes an abstract thing, a subscription we signed up for years ago to a magazine whose content we no longer read, but canceling the subscription proves onerous, as I covered in Part 6, Abandonment of town structure, Part 7, Often in a nearby district, Part 8, Parent choice is a misunderstanding, leading ultimately to the town finally having the way forward to dissolve, concluding in Part 9, Fewer in numbers all the time:


“I don’t mind driving a few extra miles to pick up a fishing license. About the only thing that’ll change is the name. We’ll go from being the Town of Atkinson, to Atkinson Township,” said Michael Snow, the town constable, whose gas station and chainsaw shop mark the town’s commercial center.



Snows, saws, and laws, all in a one-stop shop


About all a woodsman needs a vehicle, a chainsaw to clear timber, and gas to power them both.


People here are still working in forestry, farming and outdoor guiding, with a number of lodge and guiding businesses around the town and the vast North Maine Woods beyond its borders. The town is aging, though, and some residents are looking to younger generations who may settle.

Almon Currier, owner of Umcolcus Sporting Camps, is heading into retirement and selling the lodging and cabin business. “We feel it’s time for a younger generation with more energy to continue the tradition,” Currier wrote on the Umcolcus website.


“We’re fewer in numbers all the time, and the break in the taxation is going to be a big help,” Currier said at the meeting.


Every journey has an end.


“There’s privacy, and it’s so quiet,” said Ms. Libby, 51. “We want to stay here. And to do that, it needs to be affordable for us to stay here.”



And I have blogging posts to keep


AHI posts on municipal expansion, reconstitution, and contraction


May 25, 2007: As a town dies: The depopulation of Oakridge, Oregon

August 13, 2007: Cities and scale, 3 parts: Could be too big or too small

May 12, 2008: Too many houses, 2 parts: The shrinkage of Youngstown, Ohio

November 9, 2011: The un-building of un-growing cities, 3 parts: Demolitions Cleveland

February 8, 2012: Grids city, scalable city, 2 parts: The land-use patents for success

December 31, 2013: Sub-cities?, 3 parts: Chicago’s neighborhood contradictions

April 13, 2015: A tale of two cities, 12 parts: Will Chicago’s north side secede?

November 30, 2015: Fine for you but not fine for me, 15 parts: Pagedale, Missouri


Later in the month we traveled from the far Atlantic coast to the far Pacific coast, from a town dissolving because its homes are too cheap to one at war with itself because its homes are too expensive, via the Housing in Pogoland: Part 1, Good intentions:



But we’re all such good people …


It’s a good thing the Atlantic’s Conor Friedersdorf doesn’t live in San Francisco, because if he did, his recent article (The Atlantic: December 29, 2015, San Francisco’s Self-Defeating Housing Activists, would get him evicted if he were a renter, picketed if a homeowner, and declared persona non grata if merely a worker:


Tech companies and workers are vilified while longtime homeowners who fight high-density growth continue to profit from rising rents and property values.


Mr. Friedersdorf then goes on to deconstruct, dismantle, eviscerate, and otherwise dismember the hypocrisy – de facto if not de jure – of those who say they want diversity and affordability but who then pursue policies that any fool can see make diversity and affordability impossible, as detailed in Part 2, Failure to foresee, and Part 3, Refusal to acknowledge:


In Pogoland-by-the-Bay, the high price of market housing means the city ought to be consumed with a burning political desire to build more housing and a zeal to slice away any laws or regulations that obstruct affordable housing production – but, as Conor Friedersdorf discovered (The Atlantic: December 29, 2015 to his evident surprise, those who most profess passion for housing affordability are oblivious to the reasons why their advocated causes yield the diametrically opposite effect.


In a quote Mr. Friedersdorf cited, Gabriel Metcalf, President and CEO of SPUR, San Francisco Bay Area Planning and Urban Research Association, distills the paradox of American urbanization down to a single sentence so brilliantly epigrammatic I will quote it evermore:


“In a world where we have the ability to control the supply of housing locally, but people still have the freedom to move where they want, all of this has played out in predictable ways.


And here’s another moral paradox:


Think globally, act locally is a mantra for spatial exclusion.



Advocate globally, oppose locally


The city’s ideological progressives have exacerbated the problem:


“Instead of forming a pro-growth coalition with business and labor, most of the San Francisco Left made an enduring alliance with home-owning NIMBYs.”


Again Mr. Metcalf is spot-on, and this time with the paradox of values versus positions.  Because San Francisco’s liberals dislike the values they impute to business leaders and entrepreneurs, they are oblivious to the commonality of positions; instead they make alliances based on affinities (homeowners are ‘authentic San Francisco’) and thus made blind to the inconsistency of homeowners’ positions versus their stated values.



No inconsistency here


In San Francisco, NIMBYism is the bigotry that dare not speak its name, so as I’ve written elsewhere it’s always cloaked in something else: green space, historic buildings, traffic and parking, neighborhood character, or goodness knows what else.


They do this through hundreds of politically powerful neighborhood groups throughout San Francisco like the Telegraph Hill Dwellers.  



“Everything before us Great! Everything after us Terrible!”


[Continued tomorrow in Part 2.]

Are greatly exaggerated

May 20, 2016 | Apartments, California, Conferences, Housing, Innovations, Personal, Rental, US News | No comments 113 views

By: David A. Smith


It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.

A – Mark Twain



Can‘t be a Genie without a turban, can you?


Explaining the rules to the three Visionaries: Red (Carol Ornelas, Visionary Homes), White (Michael Costa, Highridge Costa), and Blue (Robin Hughes, Abode Communities)


Last week, and much of this week, I was in California, first at the California Housing Consortium’s 2016 Policy Forum and California Housing Hall of Fame Awards, as the Genie offering three wishes to an All-American panel of visionaries red, white, and blue – with the winner decided by live votes of the roughly 350 people in attendance.



Right here, direct from the lamp for your very much wish-fulfillment


After that, the Boss and I had a few desert in our favorite desert, Anza-Borrego Desert State Park, featuring slot canyons and bighorn sheep:



The Boss navigating a slot canyon


The park surrounds Borrego Springs, the Resort Town That Time Forgot.



No traffic lights anywhere in town


Wednesday we flew back to Boston, and Thursday I reoriented (more or less).


With my return to blogging, our long national nightmare is over.



How do you spell ‘affordable’ again?