Liquid wealth is generally wealth that can change hands relatively easily. Money is very liquid, at least if the backing government is stable enough and there are no serious currency problems going on at market.
A house is only as liquid as it is desired. Is it in a desirable place? Is there a market of buyers that can afford it? Is it built well and appealing? Factors such as these contribute to the value of a house, which generates liquid wealth like cash, an asset that is desired by everyone at any time.
As some commentators have noted, the basis of the modern economy is the constant changing of hands of assets, a sort of circulation. In Marxist theory, this circulation is one of the essential components of capital, and when the dynamism of capital circulation wanes, you get a specific form of crisis.
A close reading of the 2008 financial crisis shows this. The debt and bad financial products were able to pile into sky-high abstract structures, as long as they were constantly changing hands, and the momentum of this activity was able to sustained, so that any actor that entered into this arrangement was confident that the capital they put into the flows would come back augmented.
It was when the general fear set in, and spread, that all of the assets lost their liquidity; they stopped circulating, and the entire abstract structure vaporized, its ghostly form to be buttressed up again by state intervention.
The vivid imagery in Pink Floyd's "Animals" album echoes this phenomenon. The dogs - or the petite bourgeoisie, the businessmen and merchants - are depicted as loyal to power, yet duplicitous and backstabbing in their daily affairs, as they lie and steal in order to accumulate their share of weight in wealth in order to maintain power in their personal spheres.
This lying and stealing occurs over a certain interval, and goes on as long circulation is possible, as long as everyone has the chance to lie and steal their way to the top, with each individual down or up to a certain degree. However, upon a crisis, the circulating blood turns to stone, and the weight they've been busy accumulating becomes a liability, to drag them down. Instead of attending to one's life and community, producing one's own resources within one's community, one has turned to the relational process of market competition to gain wealth, which sets one's peers against oneself in competition, which eventually goes bad. The backstabbing knife turns against oneself: one does not reciprocate with someone one is in antagonism with and in competition with when times get hard.
What exactly will this hardening look like?
The absurdly overdetermined instability of the financial system could be picked apart from any angle really, but I'd like to briefly hit on its attachment to the real estate sector, since it is real estate that is immediately threatened by physically disruptive processes like climate change, and it is also real estate where the super rich are laundering their gains through various shell games. Much attention is tied up in the superstructure of the financial system itself, for obvious reasons, as we've already experienced catastrophe there and the system has not been fixed. There are other sectors to look at of course.
There is much real estate value tied up on the coasts, vulnerable places certainly as the icy landmasses fall apart at the seams at an accelerating pace. Extremely valuable properties all over the world are endangered by floodwaters, and predictably, many local governments are spending millions on flood barriers to protect this real estate, while letting the poor wash away with the floods.
But we don't even have to look to the coasts. I passed through Sun Valley, Idaho, where the most ridiculous mansions - palatial in their size - sit empty and at attention for most of the year. Much of the local economy is simply maintenance work on these residences, and they have to be heated through the winter to avoid water freezing in the pipes. The local retail and restaurant sector is heavily subsidized by philanthropic wealth that passes back into the private corporation that holds much of the land. Sun Valley is a little-known resort playground for the rich and famous.
The place wouldn't exist in its present form if it wasn't for enormous amounts of surplus wealth. Almost all of its resources are shipped in, for there is scarce farming at the scale required to feed sudden influxes of vacationers and sightseers coming to this mountainous region, which stands in a kind of suspended animation, fed by the greater market.
But Sun Valley has been hit hard by floodwaters and overflowing rivers, which are generated by melting snow caps and falling rain, attributable to the increased amounts of free moisture passing over and then heated.
Much of the building has occurred on riverbanks where owners want to be close to water, and the houses and roadways have become inundated with water; there are sandbags piled everywhere. What happens to all of that idle wealth, which figures into all sorts of balance sheets, as it loses its liquidity, its desirability? What happens to the town itself, an enormous store of wealth, as the lodgings and landscapes become impassable, and the ski resorts and summer recreation sites dry up?
The flooded houses will sit as messes, and become useless. And what will this massive loss of value, this liquidity do, to the psychology of fundamentally conservative and timid buyers and sellers? What will this do to the aggregate, as everyone retracts their assets, their money, as the fear sets in? We may very well see the blood turn to stone once again.
