Deleveration

In simple terms, our current society and economy is based on the velocity of transactions and money and leverage (aka financial engineering). We are now in the process of experiencing deleveraging and deceleration or "deleveration" as I like to call it. The ease of credit and increased transactional velocity created by the internet created an unprecedented boom in real estate. People were just passing easy $ back and forth very quickly and using creative financing to create more and more explicit and implied leverage. The music has stopped and the greatest fool has been found. The real estate game is done until fundamentals (rental incomes, etc...) come into play -- but this is a long way off. Unfortunately, this real estate game was also driven by another factor that is coming to a head: cheap oil. Thus we may be entering stage two of the great real estate plunge. People who bought vacation homes near and far rely upon cheap oil to drive and fly to their paradise. Suddenly, it's not so attractive to make the trip -- this is going to kill values for vacation homes and resort/tourist areas. This also puts another nail in the NYC real estate coffin as many foreigners have been fueling the boom here -- I wonder how they are going to feel about 50% higher airline tickets?

I could go deeper into how our whole society, culture and urban planning are predicated on cheap energy/oil into perpetuity (which ain't happening) -- but it's a beautiful day out and I don't want to depress anyone. Let's just say it could be a long painful process but the Bully has a cure: Go ride a bike.