The swelling ranks of the suitcase squad

Victory! He sold his car. A friend of mine was giddy with glee about the event and was buying the drinks for seemingly half the island a few nights ago. The ink was still wet on his airline ticket back to the states, and his bags were packed. A suitcase squad member.

Two more folks, just yesterday, told me they’re getting ready to return stateside. They haven’t sold their cars yet, though, but they will soon. And then, adios.

Unburdened by home ownership here (prohibited by law), the suitcase squad doesn’t face that asset anchor that they’d be up against in the states. When economic times turn tough, people with mortgages to pay will generally do what it takes to pay them, be it taking a undesirable job (a bit of a redundancy, eh?), getting a spouse to work, selling the kids body organs to the Mafia, whatever. Home and hearth are the central focus of life (the Spice Girls running a close second) and folks will do what it takes to keep the castle safe from the repo-man. Somehow, some way, they’ll build a financial moat. After all, home is where your home is.

Take the case of a typical school teacher from the states, not some statistically derived profile of an average case, but a purely subjective generalization of Mr. or Ms. Average teacher. Stateside, the teach might own a house, or maybe a condo, and have a comparatively new car and payments to make on that car. The home and the car are investments, made because the teacher is confident that his or her career is on a solid footing.

Here, though, never mind the house, and the teach probably drives a thousand dollar island beater car. I love those cars. You buy them for a thousand dollars. You drive them for a year or two. You sell them for a thousand dollars. There’s a vast, invisible network of thousand dollar cars being bought and sold, mostly through a word of mouth network of them that’s coming and them that’s goin’.

Here, a rented roof over your head is consumption, not investment. Ditto with a car, given that shipping costs make it unpractical to take the thing off island if you relocate. Add to this the volatile job situation at the Public School System, and you can see that the teacher has little incentive to invest. Our theoretical teacher is merely consuming, and may minimize consumption here in order to save money to invest elsewhere.

Without this installed base of investment, we’d expect a thin market in homes, and consequently volatile prices that move in exaggerated fashion with economic changes. I don’t maintain an index of home prices here, but I suspect that Saipan houses are doing about as well as Chernobyl farm-land.

A price index of thousand dollar cars, however, is easy to maintain. They cost about, er, one thousand dollars. They always have…and I suspect they always will. The are an immutable exception to the law of supply and demand, more constant in value than gold or salvation. In all other realms, however, supply and demand and the rest of the economic laws apply. Saipan will feel the consequences.