Every time the Preznit mentions the US economy he uses words like vital, robust, dynamic well, as with all our dear leaders political speechifying whether it be Katrina, Iraq, Traditional Marriage, Family Values etc, etc it is pungent with the odor of sanctimony and incompetence. Far from the boom of his rhetoric, lays the potential carnage of an American economy on the verge of implosion.
For me, this is not a 'bubble' economy, fraught with those inherent and well documented dangers, this is something more significant, more entrenched and therefore more virulent.
This administration has encouraged i) the 'Ownership Society' based on home ownership providing equity to the masses, the premise being 'the more you borrow, the more you can borrow.' ii) the 'Ownership Society' based on accumulation of wealth by the ownership of stocks and shares, which with the huge cash infusion from the little guy could only go up, but, unlike a huge institutional investor or a rich bastard just trying to get richer, the little guy can't take repeated hits when his 'portfolio' under-performs. He/She will, reluctantly (because it is the only piece of the pie they actually have any vested interest in) pull their savings from the market and put them in a safer place, perhaps a modest interest bearing account at their local bank.
Now their local bank may be carrying a little bit of debt from the mortgage crisis, nothing to worry about right? How many local banks are independently owned and operated anymore?
So our 'growth' is based upon squeezing as much cash as we can out of the people who can least afford to lose it.
The signs of a contracting economy are everywhere, look here, here, here and here.
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3 comments:
Just what would you have the president say, "Holy shit, we're going down the crapper here bigtime. Bury your money in the backyard! Start selling apples!"
The fact is, based on the opinion of one hack economist or another, the American economy is always on the verge of implosion. In the eighties it was junk bonds and the S&L crisis. In the nineties it was Y2K, the dot-com bubble, and although we didn't know about it until the 2000's, the worst epidemic of corporate fraud ever. In the 2000's, it was the aftermath of the market crash, and of course 9/11.
So maybe this time it'l all come tumbling down, but I wouldn't bet on it.
There is no doubt that there was a dramatic loosening of credit standards in the last ten years or so. This came about mainly to facilitate minority lending, but also because of innovations in the security markets that dramatically dispersed lending risk. In a world that was awash in capital, due to high savings rates in developing economies, investors could not get enough of high-yielding, comparatively low-risk mortgage-backed paper. Easy credit fueled a boom in home-building and real estate prices.
That boom is now winding down, but other segments of the economy like tech and other exporters, not to mention energy, are helping pick up the slack. As long as the policymakers don't screw it up by keeping credit too tight, or enacting protectionism, we'll be fine.
You could think of the "ownership society" as a vast social experiment. For the record, this did not consist of taking money from the little guy, but giving it to him on better terms than he had ever gotten it before. Home ownership rose to record highs. I suspect that when it's all added up, more good than harm will have been done. More people will end up as homeowners and get the long term benefit than would have otherwise. Families will have a stable environment to grow in, parents will have an asset to pass on to their kids, and that's how societies build wealth. Some will fail, too, which unfortunately, is how it works. If they have any spine, they'll get back up and try again.
It's fascinating that your Bush-hatred has now got you coming out against home-ownership. What's next? Motherhood? Apple pie?
I hate apple pie, sterilize all potential mothers...!
If I'm reading you correctly, our entire economy is built on debt. Now that's OK, it, perhaps, always has been but, never this amount of debt and never on the shoulders of those least able to react to a contracting economy.
I am all for an ownership society, I believe that everyone should have a vested interest in their lives, their community and their country but, the market has become so predatory, so greedy and unregulated that they are starting to eat themselves. Sometimes the solution does not come from the market place, there has to be government intervention and regulation, we must protect our citizens not only from predatory forces but also from themselves.
Greed is not good!
I know that goes against everything you stand for, but you are not always right... that is quite evident.
Here's the thing. The market is a very effective self-correcting mechanism. Lend money to deadbeats---you get stiffed. Speculate too aggressively on an ever-rising real estate market, you may lose your home.
Of course you need regulation. I could never understand why Elliot Spitzer spent so much time and energy going after the mutual fund industry over trivial infractions while these gigantic abuses were going on in the lending business.
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