New West Unfiltered

The Rockies’ New Diaspora , Boom and Bust

By Lance Olsen, Unfiltered 4-08-06

All up and down the Rocky Mountain chain, the influx of a new diaspora is sending sprawl across valley floors, up the neighboring drainages, and into the forests. Lenders line up fresh, new loans. Builders put up homes. Realtors rejoice over the rising tide of sales.

While many promote this as a wonderful economic boon, others warn that it's a dangerous ecological bane, creating jeopardy for everything from mice to bears. Ergo, many of us are under the impression that there is a mounting conflict between the economy and the environment.

In momentary terms, that conflict seems quite real. But a longer view reveals rising risk that the Rockies' new boom is setting the stage for troubles of the economic and ecological kinds.

The irony here is that many who tout the economic side of the argument, and disparage the environmental consequences, seem blind to very economic values they claim to uphold. So, here are a few tips for the unwary.

"Booms," money expert James Grant calmly observes in his classic and under-read book, Money of the Mind, "have consequences."

"I have simply tended to be negative about booms," investments guru Marc Faber told Asiaweek magazine in a February 2001 interview, because booms "easily turn into bubbles that become bigger and go bust."

In a July, 2001 editorial, The Economist said, "It is no coincidence that the deepest and most protracted recessions in recent decades have taken hold in countries that experienced booms…" and went on to add that "America's current (2001) recession … has been caused largely by an investment boom that has been turned to bust."

Also in July of 2001, Barron's columnist Gene Epstein said that the politics of easy money brings boom and bust "by making money available to unsustainable projects."

There's a point made and a question raised in these sober assessments of booms.

The point is that booms -- widely regarded as a signal of prosperity -- can and should also be taken as red flags of economic warning. Or, in the lexicon of Nobel prize winning real estate economist and former Fed Chairman Alan Greenspan, "irrational enthusiasm."

The question is one of time. How long can any boom last? Here, the core issue comes down to timing the market for new construction and sprawl. And market pros from many a specialty warn that timing the market is tough to do; 'tis easier to see something coming than to pinpoint its date of arrival.

In the meantime, lenders will continue taking chances with each next new mortage loan, builders will continue as if a policy of"build it and they will buy it" can work forever, realtors will assure themselves that the builders are right, and many from each sector of the boom will insist that this big creature widely called "the economy" will be endangered by the Endangered Species Act.

But the Great Rockies Construction Boom will come to its natural end for a host of reasons, with or without the onerous, terrible, nightmare-causing Endangered Species Act. Any quick look at the region's history reveals numerous earlier booms brought to varied earlier busts, and one big threat lining up on our common horizon is the bust being beckoned by the limits of western water.

Old-time boomtowns once brought their own passing bouts of prosperity. Many have vanished without a trace, a few linger as pale shadows of their former glory, and some are now tourist traps of national stature. Westerners have long named the empty shells of former boomtowns as "ghost towns."

Unthinkable though it may be in the midst of today's enthusiastic lending, building, and selling, we shouldn't dismiss the possibility that at least some of today's booming subdivisions are at risk of becoming the ghost towns of tomorrow. And water may be their downfall.

My own expectation is that, again and again, at varied locales all up and down the Rockies, we'll be seeing housing sprawl reach the point of the first thousand waterless homes. One such home won't cause even a little ripple on the flood of money pouring into that locale.

Sure, the person or family who moves into that new home and can't get water out of the shower or the kitchen sink will be crushed by that blow. But others will regard it as anomaly, and will gladly buy the house just down the road.

Then, by the time there are a thousand other families hit by the same lack of water, the national media will pick up the story for every living room in the nation, and the selling in that specific locale will come to a halt.

Repeat that scenario enough times, and the Great Rockies Boom will be done. But it will have left many an empty structure for future generations to regard as the equivalent to the ghost towns of a new era.

How odd, those future generations will say, that anyone could allow such economic foolhardiness to endanger not only wild species, but also the very wild and wooly boom that was so popular in its day. What species of politics, they will ask, would tolerate a divisive conflict between economics and the environment when both were ultimately lost to irrational enthusiasm?

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