(Thanks for getting serious.)

Part of what sent me down that trail is that the reason most often given for outsourcing is lower labor costs for equivalent skills; lack of skill on the part of American workers is almost never cited. Nor is work ethic. The majority of the outsourced jobs are eight-hour/day clerical jobs, including telephone support, and the job involves the same amount of sitting in a cubicle and answering the calls that come in whether you're American or Indian. Of the highly skilled jobs being outsourced, especially engineering, work ethic is never a problem--good engineers are motivated by love of the game and put in long hours no matter where in the world they live. You should get out more--you and I live in the land of workaholics. Charges of insufficient work ethic are particularly hollow in the technical and engineering fields.

The explanation of lack of educational skills I also find dubious when it's applied to the loss of all those highly-skilled technical jobs. While there's no denying that when you look at entire populations, Americans are on average less educated that people in countries like Japan. But we're looking now at a narrow segment of each population, each representing the educated elite of their respective societies. I just don't see lack of education as having any explanatory power at all.

If what's left, then, is high cost of labor, it's appropriate to look for an explanation for it, and housing is by far the largest expenditure of all middle-class Americans. What's telling is that that percentage remains relatively constant around the country, and extracts a larger dollar amount wherever incomes are larger. Here in the Valley businesses have long complained about the vicious cycle of having to pay workers ever-more money to keep up with the inflation of housing prices fueled by the ever-rising incomes in the Valley.

I work with a lot of people in real estate and associated fields, and, like the article you linked, they're all trying hard to come up with reasons why the bubble won't burst. The argument usually starts by trying to deny the existence of a bubble at all, then followed by purely psychological arguments about people's faith in the value of real estate. If a market is characterized more by psychology than concrete calculations of value, it's a bubble.

The linked article was an avalanche of statistics, and like you, I could only focus on one part at a time, like the yearly inflation rate. But I couldn't find the total inflation rate over time, which is a good sign of statistics being used to obfuscate rather than educate. Working from the one example of median price change from 1968 to 2003, back-of-the-envelope, housing prices have inflated 800% over that period. That number's a bit more impressive than 2% per year, eh? Don't ever forget about the miracle of compounded percentages.

I can see you wanted to blame Democrats when you brought up "massive restrictions on development", but it doesn't wash. If red tape sapped a significant amount of value from housing, why would people consider it the best investment vehicle around? What amount of red tape could make a dent in 800% inflation? People invest for profit (albeit paper profit), not just to brag about a high home price that's all eaten up by red tape and taxes. Nope, sorry, no joy there.

I'm working backward from macro-economic first principles. If the American economy is uncompetitive and Americans are losing jobs because of the high cost of American labor; if that cost is due to a high cost of living; if real estate is the largest component of that cost; then it's pretty logical that the high cost of real estate in America is a significant factor in our problems.

And if that's the case, then something will have to give, whether we like it or not (you know, free market principles and all that). I think that by denying the problem we're setting ourselves up for a terrible crash. If we started working on the problem ahead of time, perhaps we can come in for a softer landing.

Capital fled Wall Street for real estate when the dot-com bubble burst. It would make sense to "restructure our portfolio" by moving the money back out of real estate and into productive investments again, with the added bonus of economic stimulus. Passive investments like real estate and gold are sheltering investments, and don't stimulate further economic activity (no catalytic effects). People should rationally use real estate and gold as hedge investments, but not as their main investment vehicle. Too many people hedging instead of actively investing drags down the economy too.

Speaking of hedging, I should save us some time and point out that nowhere have I called for the goverment to "do something", nor have I condemned real estate investment as some sort of conspiracy on the part of the banking industry to enslave Americans with mortgages. Maybe the lack of juicy partisan talking points is why this mundane explanation for our problems doesn't get talked about much--no scapegoat to blame, instead just the sneaking suspicion that we've screwed up and done it to ourselves. I can understand why it's more satisfying to look for a scapegoat, but I don't see one.