99 Cent Stores and Florida Homelessness

Tuesday, August 11 2009 10:15 p.m.

When a manufacturer incorrectly predicts demand for a product, it's left with a giant glut of product. The glut of product is either dumped by the manufacturer at a steep discount to raise cash, or it runs out of cash and its sold to someone to liquidate the excess inventory. Suddently, the product shows up at a 99 cent store. The manufacturer or liquidator gets some cash, the 99 cent store makes some money, and you can afford that Milli Vanili CD you've always wanted.

Unfortunately, because of the government, that's not how the housing market works. In the name of protecting american home owners, but really bailing out the well connected banks, we're propping up home prices. There are 300k such homes on property value stilts in Florida alone.

Meanwhile, Florida now has tent cities to help out the recently homeless. That's right, there are 300k homes vacant, yet we have tent cities in Florida. Obviously, there is demand for housing. Obviously there is too much supply. Unlike the unconnected manufacturer liquidating inventory at wholesale, banks have to do no such thing. They're better than us so they get bailouts.

Imagine, in a John Lennon sort of way, that the bailout didn't happen. That we went the 99 store route. Eventually, those houses would have been bought for pennies on the dollar. Some of those recently homeless would instead easily renegotiate what they owe to only half. If you bought the loan for 20 cents on the dollar, would you rather try to deal with the hassle of finding a buyer or take the offer from the family already living there of 50 cents on the dollar? Some might be converted to rentals. But instead of having to charge $1,000 per month, you could make a tidy profit only charging $300 per month.

Congratulations. We've all been mugged by Bushama. What can we do about it? Next time the government announces a multi-billion dollar program... Realize that those with more than you are better connected to the government. They're simply trying to dip their hands into your pockets through IRS forms. Next time don't ask what the government can do for you. Ask, what can the government do to you.

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