Why is Spanish unemployment the highest in the EU (or: never underestimate the housing market)?
from Merijn Knibbe
Spanish unemployment is, with about 23% U-3 unemployment, the highest of the entire European Union. And it is still rising. And it has been rising for 53 months in a stretch. Time for a closer look: what happened, what’s still happening? And the answer is sobering: it still is the housing market, five years after the housing boom changed into the housing bust (graph).
What does this mean (aside from hardship and loss of income and self-esteem and higher budget deficits and the like)?
* monetary and fiscal policy won’t be enough to restore prosperity.
I completely agree with the view that, at the moment, monetary and fiscal policy in Spain is pro-cyclical and even strongly so. That’s stupid. And it has to change. But that won’t be enough. New sectors of the economy have to come into existence. Existing sectors have to grow. People have to be retrained (among other things: the Spanish don’t speak their languages. In the modern world, a country can’t afford this anymore). Investments have to increase. I do not know which sectors have to increase. But in Germany, where the number of jobs increased with about a million in the same period, the number of jobs in ‘human health and social services’ increased three times as much as the number of jobs in the most important (and amazingly succesful) German export sector, manufacturing.
Yes, the housing market (i.e. the land market) is at the centre of the storm. Loose credit – fixed land supply. Most credit underpinned by land value. Spain, Ireland, Australia, China, US, UK. What do the economists have to say about this? Every time I and others raise the issue here it is soundly ignored.
Why has it been allowed to speculate on the housing market in the first place?
As the real estate bubble has burst in most countries, many arable land in Africa is being bought by speculators and prices are rising more and more so many people from poor countries cannot grow their vegetables so they have nothing to eat because they cannot afford the land.
What will be the next bubble?