[lbo-talk] Alas, poor Citibank!

[Carl Remick]

On Nov 7, 2007 1:47 PM, Doug Henwood <dhenwood at panix.com> wrote:
>
> On Nov 7, 2007, at 11:57 AM, Carl Remick wrote:
>
> > Hmm, I would argue that these expenditures in household improvement
> > *are* consumption, not capital investment, since they have been made
> > prior to a collapse in housing values, thus do not now add to the
> > owners' equity.
>
> That's not the way national income accountants see it. This gets
> arcane, but here it is. Building a house, or adding onto or
> remodeling an existing one, is residential investment. It's an
> investment because it lasts for a very long time. (The Fed's flow of
> funds accountants even classify the purchase of consumer durables as
> an investment - the national income accounts don't do that.) Equity
> doesn't matter in the accounts at all. Neither does the purchase or
> sale of an existing house (or any other asset, like a stock). Owner-
> occupied housing enters the national income accounts as the
> consumption of housing services. The concept is that owner-occupants
> are both landlords and tenants, who enjoy that stream of housing
> services in exchange for...imputed rent they pay themselves. For the
> full story, see:
>
> <http://bea.gov/papers/pdf/RIPfactsheet.pdf>.
>
> Now I know this sounds crazy, but the point is, as they say, to
> separate the investment and consumption aspects of housing.

To me, this doesn't "separate" investment and consumption at all.  It
makes any distinction between expense and capital investment
meaningless.  This is the kind of capitalist logic that made Milo
Minderbinder one of Catch-22's most hilarious characters.

Carl