STOP EXPECTING DIFFERENT RESULTS-When applied to a city, “entropy” means that the socio-political structure is disintegrating toward chaos. Re-phrased for Los Angeles, Entropy Theory asks: When will Los Angeles’ entropy reach a critical mass so that the city implodes as a viable entity?
Economists ask a similar question: How can we know when the boom phase of the business cycle will crash and we enter the bust phase?
One thing seems pretty clear – no one in the world is worse at predicting when a crash will occur than Wall Street. I doubt Wall Street has noticed a crash except in hindsight. Leading up to the Crash of 1929, there were many signs of trouble, but Wall Street attributed each jolt as an idiosyncratic event like Clarence Hatry’s use of fraudulent collateral to purchase U.S. Steel. Collectively, Wall Street failed to realize that the Whack of Mole Syndrome was due to an underlying systemic weakness. By the autumn of 1929, however, the problems may have been too deep to have yielded to any painless intervention. Also, when people are making money, their ears are closed to any warning of financial danger.
Afterwards in 1936, John Maynard Keynes published his General Theory, showing that we did not have to wait until disaster was upon us, but rather could temper a too heated boom while lessening the decline of the bust phase. To say that Keynes is referring to “deficit financing” is to show that one does not understand Keynes. Step one in protecting the economic system was the same for Keynes as it was for Adam Smith in 1776, when he published Wealth of Nations – protect the price system.
Similar to how the Barons of Wall Street ignored the price system during the 1920s, the United States departed from both Keynes and Smith in 1999 when Congress and President Clinton repealed Glass-Steagall. That allowed massive trillion dollar frauds to wreak havoc with price system. Around the same time, the government legalized credit default swaps. The result was the Crash of 2008.
Yes, it is deja vu all over again. The prospect of listing Los Angeles’ obvious weaknesses is exhaustingly boring. It seems that the only thing keeping LA afloat is vast ignorance. People act on the basis of Belief with no use for Reality. People race toward a Charlatan who promises to restore them to the glory days of greatness or who serenades them with Alt-Fact after Alt-Fact. Trump’s and Garcetti’s personalities may be polar opposites, but their game plan is the same – “Alt-Facts uber alles.”
As noted in a previous CityWatch article, “Alternative Facts’ are Nothing New for Angelenos,” the first attribute an Alt-Fact must have is to please the listener. Alt-Facts are tailored to make people feel good; myths are more soothing than reality. No one wants to hear that Cinderella was ugly and Prince Charming was an abuser. Fairy tales do not end with, “Ten years and four children later, Cinderella had to hide in the forest to escape the beatings of Prince Charming.”
Thus, the LA Times and Eric Garcetti spin myth after myth, while most Angelenos slip off into dream land, never noticing that Wall Street is robbing them blind with mortgages and rents which are two, three or four times higher than merited. LA voters do not heed Albert Einstein who said that the definition of insanity is doing the same thing over and over and expecting different results.
Thus, Angelenos know that for over a decade the city has been Manhattanizing, the infrastructure has been crumbling, traffic gridlock is the worse in the entire world, housing prices are among the highest in the country, Family Millennials are fleeing the City, LA has become the least desirable place for upper middle class workers, the streets are terrible, our taxes are increasing while our tax base is shrinking, we lost a $1.3 billion lawsuit due to our dangerous sidewalks, employers are leaving, crime is increasing, the city is insolvent again, and the mayor and city councilmembers are taking bribes to up-zone everything.
Amidst this decay, Angelenos had a chance to call a halt to it and reassess the situation. Instead, they decided to push ahead doing the same thing that’s been destroying the city. They believe more densification will solve their problems as if the cure for arsenic poisoning is more arsenic. For some reason which defies explanation, Angelenos think that tearing down more rent-controlled housing and building more luxury units will reduce homelessness.
Stories from the 1920s, however, parallel what we see in Los Angeles in 2017. People select the Alt-Facts which please them without regard to logic. When they hear that there is a glut of upper income apartments with a growing vacancy rate, they fail to realize the underlying reality -- if there were a demand for this housing, we would not have such a huge vacancy rate. The vacancy rate for rent-controlled units should not be confused with the vacancy rate for up-scale units. Tearing down 22,000 rent-controlled units does not create 22,000 tenants for high end apartments. Rather, it creates a housing shortage at the bottom end of the market which will never, ever be satisfied by constructing more luxury condos.
Now that Angelenos, or the 8.28% of them who voted No on Measure S, have decided that we must densify, densify, densify, the task turns to figuring out when the Crash will hit. The difficulty is not knowing when people will realize that Prince Charming is wearing a “wife beater” tank-top.
(Richard Lee Abrams is a Los Angeles attorney and a CityWatch contributor. He can be reached at: Rickleeabrams@Gmail.com. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.