The only proof you need that many Californians are still living in a water fairy tale is the fact that California real estate prices haven’t yet collapsed. Even as the California Governor has declared a state of emergency — and emergency water rationing is under way — there are still people purchasing commercial and residential real estate in precisely the areas that will be hardest hit by that rationing.
What is the value of a home or business that has no functioning connection to a water system? Essentially ZERO.
How many California homes and businesses are headed for a zero-water future? Many millions.
How many Californians are aware of all this and already have their homes on the market so they can move somewhere else? A very small number… a tiny fraction of the total number of home and property owners invested there.
What these people are unfortunately not yet seeing is the catastrophic consequences of a continued drought and how it can utterly destroy the value of their property.
Understanding the psychological dynamics of real estate valuation
To understand what’s coming, you first need to understand the dynamics of real estate valuations. Here’s a question for you: How many homeowners selling their homes does it take to collapse real estate prices?
The answer may surprise you. On any given day in most areas, fewer than 1% of homes are for sale. (99+% of homes are not for sale.)
Valuations of “for sale” homes are buoyed solely by the demand of a ready market of buyers who are actively looking for new homes (and willing to pay for them). Home prices are rarely a reflection of their hard asset value but rather a reflection of what buyers are psychologically willing to pay for them.
The single greatest determining factor in this psychological formula is the idea of SCARCITY. A home or building in downtown Los Angeles is worth what it’s worth because it is a scarce asset, meaning there are more people who want to own it than actually own it. (There might be a thousand people who wants to own it, but only one who does.)
In real estate, scarcity is also strongly tied to geographic location, obviously. While a home in an elite neighborhood of Santa Barbara might be extremely scarce (and thus extremely expensive), an isolated home in the middle of nowhere has only a fraction of that value, even if it has the exact same build quality and square footage.
Now that you understand all this, ask yourself: What happens when the California drought eventually motivates a growing number of people to decide to sell and move? You get:
1) A dumping of “for sale” homes onto the open market.
2) A collapse of scarcity. Suddenly, buyers have a huge number of homes to choose from.
3) A resulting collapse in home valuations.
As more and more people try to sell into a market that has a dwindling number of buyers, you get something that economists call a self-reinforcing feedback loop. Falling property valuations result in long “days on market” times for property owners (it takes longer and longer to sell their homes). This causes some sellers to shift into desperation mode and start steeply discounting their selling prices. As buyers jump on these deeply discounted prices, it creates a new, lower valuation comparison for what real estate agents call “comps.” (Price comparisons.)
Before long, every buyer lowers their own offering prices to match the falling prices. This causes more homes to take even longer to sell (because sellers are usually delusional about what their precious homes are really worth), further amplifying the downward spiral feedback loop.
Fast forward this over a few years — and add in a glut of more sellers who are also trying to get out — and you have an inevitable real estate market collapse.
But the real estate market collapse, it turns out, is only the beginning.
As property taxes collapse, California cities and towns will plunge into bankruptcy
Property taxes are the primary revenue sources that keep cities financially afloat. Because cities can’t print their own money like the Fed, they can’t create money from nothing and spend it to run their corrupt fiefdoms.
Sure, cities can issue bonds, but those bonds have to be repaid. And you can’t repay the bonds if you don’t have the cash flow to do it. Cash flow comes from property taxes which will plummet. Do you see the problem here?
This situation is made far worse by the fact that many of California’s cities and towns are already in a state of near-bankruptcy. The California lifestyle, led by delusional Democratic lawmakers who simply refuse to follow sustainable economics, has always been one of “consuming more than is sustainable.” So California governments have been big spenders on social programs. But those social programs now exist as giant anchors around the necks of all California taxpayers, which is why California is one of the very worst tax states in the union.
As real estate valuations collapse, property taxes will fall. To make up the difference, California will refuse to cut social programs (because that would offend their entitlement voters) and instead will hike other forms of taxation to unprecedented levels. Business taxes, sales taxes and possibly even taxes on sunlight (solar taxes) will become the new norm as California desperately tries to stave off total financial collapse.
This, in turn, will cause an acceleration of the exodus of California taxpayers who finally conclude, “I’m outta here!” Many Californians have already realized they can move to places like Texas where taxes are low, real estate is relatively affordable, and the state isn’t led by psychopathic socialists. (Sadly, Californians are now transforming Austin into another high-tax socialist police state with endless traffic jams and a corrupt city council, but that’s another story.)
Home loan defaults will send banks careening toward bailouts
All this will cause a wave of home loan defaults across California, sending local banks into their own financial plunges, much like what we saw with the housing bubble crash. This, in turn, will necessitate banks sharply reducing lending to local businesses, denying capital for business expansion and stifling the future growth of the California economy.
Eventually, California’s cash-strapped government will have no choice but to raid its own state pension funds while claiming it is “saving” them. When a California bureaucrat puts a gun to your head and says, “Give me half of everything you’ve saved,” you’re supposed to answer, “Yes sir! I’m happy to help bail out your corrupt socialist empire of debt with my life savings!”
But the far more dire reality is that as towns and cities go bankrupt, they will inevitably slash police and firefighting budgets. This will lead to an emboldening of the gangs that already dominate many areas of Los Angeles, San Diego and San Francisco, even while politicians running for office will absurdly claim how they’re “tough on crime!”
Before long, Collapsifornia citizens will find themselves living in cities where police protection is practically non-existent. This is at the very same time that citizens are denied their right to self-defense by the same anti-gun socialist government that thrust them all into bankruptcy and crime in the first place. Dial 911 and die, in other words. Because your own state government is too broke to provide police protection, but also too corrupt to allow you to own a firearm to protect yourself.
So as the California drought really takes hold, its citizens will be headed for a brave new world with no water, no police, no pension and no future. Their homes will plummet in value, their agricultural hubs will be deserts, and their tax burden will be impossibly arduous. Under such circumstances, everyone who still has the resources to flee the state will do so, leaving behind the entitlement class who don’t pay taxes at all and therefore will only drag the government into certain financial insolvency.
Could this be prevented?
But wait! I hear readers saying California could just desalinate ocean water and solve all this. After all, there’s seemingly an unlimited volume of water right next door in the Pacific Ocean. Why can’t we just use that?
If there’s one thing California bureaucrats are really good at, it’s promoting delusional thinking disguised as “optimism.” So let’s see how this would work:
Desalinating water requires enormous amounts of energy. And because there’s no such thing yet as a fusion-powered desalination plant, you’d have to use coal power and natural gas to run them all. Fossil fuels emit carbon dioxide, the single most hated molecule in all of California. If you start desalinating ocean water with fossil fuel-generated electricity, you then have to equate water usage with a carbon footprint.
Suddenly, washing your car makes you an enemy of the planet. Even flushing your toilet might make you a criminal. Governor Brown recently stated that “people who take long showers” might be fined $500 or more, by the way, so it has already begun.
But if California seriously hopes to meet its water demands through the desalination of ocean water with coal- and gas-generated electricity, then California would become the greatest CO2 polluter in North America.
The Koch Brothers would laugh their heads off on that one. The “greening” of California with water would only be accomplished through the polluting of the world with fossil fuel emissions. With desalination, California would, in essence, be mocking itself by polluting the planet in order to make its own lawns, cemeteries and golf courses look artificially lush and green.
Fossil fuel-powered desalination turns out to be a really stupid idea. (But maybe they can pass a bill before anybody has a chance to read it, and thereby make it happen… who knows?)
Okay, you say, so fossil fuel power is out the window. Why not use nuclear power?
Another awesome answer! Let’s build Fukushima-style nuclear power plants on the coastline of California so that the next great tidal wave causes them all to go into nuclear fuel meltdown. Cesium-137 is good for you, didn’t you know? And so is radioactive uranium and plutonium. After all, California is home to some of the world’s most absurd biotech scientists who claim glyphosate and GMOs are good for you… why not add radioactive isotopes to their list, too?
Even if you could build nuclear power plants on the West Coast that were immune to meltdowns, it would take 10 – 20 years to build them. But California is running out of water starting NOW. The crisis has already begun…
How else could we solve the water crisis in California? I’ve heard all sorts of loony ideas, like, “Let’s blanket the deserts with solar panels to power the desalination plants.” People who come up with these ideas have never owned or run their own businesses, of course, so they don’t have much familiarity with practical, real-world logistics. They engage in what I call “magical thinking” which involves coming up with an idea and believing it’s real because you thought of it. This is what drives Hollywood, of course, which is why this sort of magical thinking is so prevalent. But solar panels are not movie scripts. They’re physical objects that need a massive infrastructure to carry the power to where it’s needed on the coast.
Solar panels are also made from some really dirty rare earth elements mined in China’s ecologically disastrous mines. So before you can go “green” with solar, you first have to get dirty with a serving of eco-destruction and horrendous labor practices in a foreign land. The up-front costs of such an installation are daunting, too, running into the hundreds of billions of dollars for a large-scale power infrastructure that could power desalination plants (which are extremely energy-hungry).
Beyond this, the ideas for solving California’s water problem tend to devolve into Pelosi-style fantasyland thinking, such as “Let’s ask Iron Man to build a fusion reactor desalination plant. Isn’t his lab on the California coast?” Sure it is! And the Iron Man suit somehow doesn’t break every bone of Tony Stark’s body when pulling 150 Gs with sudden landings on concrete. That’s Hollywood magic for ya! Who needs logic when it all looks so real on the silver screen?
Drink your pee, double-stack your poo, and don’t flush unless you really have to
Conservation can’t solve the problem, either. This fantasy that Californians can achieve water sustainability by drinking their own recycled urine, taking really short showers, and shrinking their toilet flush tanks is pure hokum. It’s also pretty gross, and it’s thrusting California into a weird third-world status where people are going to be forced into confronting their own raw sewage because they’ve exceeded their “flush limit” for the day and don’t want to go to jail. (Hint: Composting toilets will do huge business in California in the years ahead, because they use no water…)
The real water usage in the state is for agriculture and animal ranching. Unless you shut down the agriculture of the state, you’re not really going to make much of a dent in its water appetite, no matter how many times you poo before flushing.
At the end of the day, I’m not sure that any sane person really wants to live in a bankrupt state that’s dominated by criminal gangs and psychopathic socialist bureaucrats, where they have to drink their own recycled urine, double-stack their “number two’s” in the toilet before flushing, and pay outrageous taxes just so the government can provide free services to illegal immigrants who outvote the legitimate taxpayers at every election. The water problem is just one sign of the far deeper problem that California is a state run by a corrupt class of elitist kleptocrats who are totally out of touch with reality and are driving the state into certain collapse.
Study this rainfall map before you decide where to go
Why is Austin such a hip destination these days? I mean, aside from the tattoos, dreadlocks, night life music scene and SXSW?
Here’s why: If you look at the annual rainfall map of America, it doesn’t take long to realize “Holy smokes! There’s no water from San Diego all the way to Austin!”
Austin is the dividing line where the rainfall begins for the Southern USA. West of Austin, almost everything is desert or near-desert. East of Austin, you get enough rainfall to live off rainwater collection.
If you keep going East, you end up in Houston, where the humidity is suffocating and the waterways are full of alligators (that’s not a metaphor, they really are full of alligators). And if you go very far North, you get freezing cold winters and deathly-hot summers, neither of which Californians are prepared to brave.
So they often end up in Austin, where there’s just enough water to get by, but not any sort of horrible humidity, tornados, hurricanes or anything of the sort. The greatest natural disaster threat in Austin is called “Interstate 35,” which is dotted with on-ramps and off-ramps that were designed by a madman high on crack.
You could also go to Alabama, but Alabama scares Californians. Louisiana scares Alabamans! Florida has hurricanes and Jeb Bush, and none of us is quite sure which is the greater disaster. So people just end up in Austin, which is rapidly becoming just like California, to the great shock and horror of real Texans who are surprisingly close to staging a revolt and declaring Texas its own sovereign nation. (I’m with Chuck Norris on this point, thank you!)
Those of us who feel at home in Texas are working hard to defend its culture and liberties against the onslaught of climate refugees leaving California. So please, to all those considering fleeing Collapsifornia, don’t come to Austin unless you are pro-liberty, pro-Second Amendment and pro-patriotism for real America. Yes, we welcome your juice bars, organic farming, health food restaurants and abundant creativity, but we don’t want the horrors of California’s Big Government to be replicated here in Texas. We don’t need any commies, socialists, American flag haters, veteran bashers and anti-gun kooks. If you come to Texas, respect Texas culture and enjoy the prosperity that comes from living in a state that isn’t run by psychopathic control freaks who disarm their own populations and then enslave them with punitive taxes.
Texas, by the way, is about to legalize the open carry of pistols among citizens who have concealed carry licenses. This will make Texas the safest state in the union and will completely derail would-be terrorists, attackers and mass shooters. The last thing they want is an entire population of armed, determined citizens who are capable of shooting back. I can’t wait to take a stroll down the sidewalk on North Lamar, right in front of the Whole Foods world headquarters, and observe citizens with loaded pistols on their hips, calmly going about their business. If this idea freaks you out, you can always choose cities where citizens are disarmed — like Detroit or Chicago, the violent crime capitals of America, run entirely by Big Government kleptocrats who despise liberty and are particularly skilled at destroying prosperity.