This is when I may need to put my flame suit on.
Well, actually, you probably should have put it on at the VERY beginning, but since you are safely ensconced in flame-proof gear, I'll be more than happy to oblige, with as much civility and tact as I can muster in addressing the error of your ways...
It's not the fault of the lenders, or the housing buyers, or greedy yuppies, or "moving-on-up-minded" lower-middle class people, or even the predatory credit card companies.
The fact of the matter is that this entire "housing credit crisis" is a HUGE sham--a smokescreen if you will--to cover up the REAL problem in the USA's financial sector. Mortgages represent less than 1% of the total exposure for banks, lenders, and financial insitutions in the USA. If EVERY single homeowner in the US went into totally unrecoverable default on their loans today, it would really only be a tiny blip on the overall stability of the financial sector in the USA. It would have about the same real impact on our economy as if, for instance, every car owner in the state of West Virginia stopped driving their cars tomorrow, and just took bicycles for the rest of their lives. Really. It's just really NOT that much exposure in the overall big picture of the financial world. Prior to the 1990's, the mortgage business was considered to be sort of "sprinkles on the cupcake" to the US financial sector.
The REAL problem with the financial sector is Credit Default Swaps.
A CDF is an instrument invented by large financial institutions. A CDF is essentially an insurance policy taken out against the possible default of a credit exposure. When a large financial institution extends credit, it has what is called "exposure". In order to protect themselves from that exposure, an institution will ask another equally large financial institution to write a CDF for a fraction of their exposure, which will pay them a settlement if the creditor defaults. This second party, then, has exposure from their CDF, and will ask another insitution to write THEM a slightly smaller CDF, etc., etc., on down the line, until the fractional exposure amount no longer is seen as a threatening exposure.
In other words, Credit Default Swaps are an inverse pyramid scheme, built upon the hopes that a creditor doesn't default. But if, for some reason, ANY single issuer of a CDF calls their swap, everyone down-stream from them must come up with the funds to cover their swap.
This is how Bear Stearns went down. Someone beneath them called a swap, and they didn't have the liquidity to cover the call...
And the vast majority of these "exposures" are insitutional loans or instruments--NOT home mortgages, credit cards, or other piddling credit instruments. We're talking corporate loans, governmental loans, international investment bank funds--multi billion dollar transactions. It is a HUGE financial shell game, where governments and coprorations take out loans from each other and large financial institutions, to cover costs, payrolls, and large projects, and secure those loans with other, equally vaporous instruments like stocks, Bonds, Treasury Bills, and other securities.
The truely scary thing about CDF's is that they are largely inregulated--as they are not publicly-traded securities, the SEC or the Dept of Commerce has no real jurisdiction. They are essentially a self-regulated security, policed and controlled by the people who issue them.
And it is THIS paper-chase that is the REAL "credit crisis". It is because the majority (far more than 51%) of the Dollars changing hands on the international financial scene are backed by nothing tangible, but are only secured by the faith of those involved in these trades, that the Dollar is losing it's value, and eventually, if the current trends continue, will reach near-Depression-era devaluation within the next 10 years.
The "price" of Real Estate, hard goods, and most services has not changed in the last 100 years in the US. The value of the dollar, however has devalued in relation to those goods and services by about 400% in that time.
I may be wrong in many of your eyes but this I think this is just the greed and impatience of human nature.
On this point we are in COMPLETE agreement. The American public has bought into the culture of instantaneous gratification hook line and sinker. Many Americans believe they have a RIGHT to a level of economic prosperity equal to or greater than their parents, because for the last 60 years, this has been the case.
So regardless of the fact that the Dollar is worth less now than it has been since we went of the Gold Standard, and the fact that Real Wages for middle-class laborers is at it's lowest point in over 50 years, and our government and corporations have placed rampant low-cost consumerism ABOVE the economic, industrial, and technical health of the USA for the last 20 years, most Americans, ESPECIALLY those in the middle- and lower-middle class feel they are sort of OWED the same standard of living their parents had, even if they are making less, buying products that are shoddily made for more money, and pumping their comsumer-goods dollars by the ship-load into foreign governments who are essentially our Economic Enemies.
We are short-sighted. We are greedy. And worst of all, we have allowed our government and our corporations to de-educate us to the point where the average American is simply unequipped to rationally, logically or critically analyze the situation.
We have, dear friends, colluded in our own enslavement, and we have voluntarily set ourselves up to live in a feudal society, where any criticism of the status quo is branded as "crackpot thinking", and any refusal to participate is viewed as "unpatriotic".
Mr Wells, we tip our hat to you indeed. You were only off by about 20 years... (oblique "1984" reference...)
Then there's the price of oil and the effect on food and commodities that makes the unemployment problem even worse for many.
The "price" of oil is one of the few "prices" that has actually gone up, even calculating the devaluation of the dollar into it. It has, in fact, risen with complete disregard to world supply and demand, speculative manipulation, or any other measurable market indicator. The "price" of oil has risen, mostly because the al-Saud family, in collusion with the Bush dynasty and other American petro-chemical concerns realize that their window of profit is quikly coming to a close, and they had better "get it while they can". If the next American President (be it Democrat or Republican, male or female) decides to attack our energy situation with the same vigor and focus as was put toward the Manhattan Project or the Apollo Missions, America could be running just about everything that uses combustable fuel on something OTHER than petrochemicals within the next 2 decades, with the rest of the world to follow soon thereafter. And although a large part of the American economy is based on oil, the ENTIRETY of the Saudi economy, and fortune of the al-Saud Royal Family is based on oil. They have a LOT of motivation to get every penny out of the fuel tanks of the world in the next few years, because by 2050, if the world plays it's cards right, the internal combustion engine will be about as common as Edison Wax Cylinder players...
I personaly believe many Americans are just very slow learners. When things are good why think about the future.
No, we are VERY fast learners. It's just that we've been TAUGHT to believe in a "reality" that has no basis in reality at all--the idea that the Dollar is iron-clad; the idea that every American generation has the RIGHT to improve their standard of living over that of their fore-fathers; the idea that we can demand incredibly low priced goods to feed out rampant consumerism (which can only be produced by third-world manufacturers who use shoddy materials, dangerous working conditions, and have complete disregard for environmental health and safety) and still expect to have jobs that pay wages high enough to continue to buy said goods, etc., etc., etc.
Why does a TV, automobile, or telephone today, which is supposed to be "state-of-the-art", built using the most high-tech facilities and designed by the most advanced scientists, have roughly 1/3 the useful lifespan of the same sort of item built here in the USA 20 years ago?
Well, first, it's because long-lasting consumer goods are deemed as being "bad for business". If the stuff people have works, they generally won't replace it.
Secondly, most of those goods are being built by people who have no stake in the reputation of their product; people who are one step above slave-labor in nations where they get back a miniscule fraction of the "economic value" they produce; people who can NEVER hope to afford to purchase the very products they produce.
As far as the recession if we had paid more attention to our financial condition and had voiced a bit of opinion on becoming energy sufficient previously it would lessen the problems we are having today.
If the average American had even a SLIGHT inkling as to the REAL way that our financial community functions (and this includes our own Government's financial dealings), this would go a LONG way toward solving this problem, because it would probably result in mass movements by the public toward a cry for economic responsibility for ALL parties--individuals, institutions, corporations, AND governments.
For instance, if Americans knew where the money was coming from for the "Bush Tax Refund", they would probably tear their checks up the minute they received them, in disgust.
This "stimulus package" is funded largely thorough the issuance of Treasury Bills by our government. The primary purchaser of US T-Bills is foreign governments. Currently, the largest purchaser of US T-Bills is the government of the People's Republic of China...
To put this in simple terms, that would be like the US government funding the Apollo Program with loans taken out with the USSR. Or funding the Manhattan Project by selling T-Bills to Germany in 1944.
It defies logic. It defies ethics. It defies all rational thought.
But since our educational system and our media have been effectively designed to PREVENT the development of rational analysis by the American public, nobody seems to understand what is going on. And anyone who dares to raise this warning flag is branded as "unpatriotic" or an "economic crackpot"...
"Truth" has become commoditized, and it is every bit as flexible and variable now as the "value" of our currency. And because of this, REAL truth, like REAL money, has become the province of crackpots, nutcases, and weirdos, at least in the eyes of the general populace.
No body ever wants to make the sacrifice them self but that is the only way it will all work.
Americans have made PLENTY of sacrifices--they have sacrificed their industrial base in order to get lower prices. They have sacrificed their family-owned businesses in order to get the "convenience" of shopping at mega-stores. They have sacrificed their financial discipline in order to "live for the NOW". They have sacrificed the future health of their children and their planet by continuing to use petrochemicals because they are too greedy to explore other alternatives that might make the petrochemical industry obsolete. They have sacrificed their position as the manufacturers of the world's best hard goods by shipping their manufacturing base abroad so their WalMarts will be filled with goods they can afford on their near-feudal wages. They have sacrificed the most advanced medical community in the world so that insurance companies (who don't have to take the Hippocratic Oath) can maximize profits by telling doctors and nurses who can and cannot receive treatment based on cost-benefit tables and risk analyses of their cases rather than medical need.
No, Americans have made ALL kinds of sacrifices. But mostly we have sacrificed our own freedom and perhaps the very soul of what it means to be an American, by allowing our lives to be controlled by people who's ONLY interest is the nearly-psychotic accumulation of wealth.
If you're going to blame someone, blame EVERYONE, because we're all at fault. The big guys are to blame because they have preyed on the ignorance of the average person. The government is to blame because it has actually encouraged this sort of behavior--both the predatory business models AND the purposeful dumbing-down of the People. And the People are to blame, for not being smart enough to acknowledge the reality of the situation or or disciplined enough to do anything about it.
Remember, when you point a finger, there are three more fingers on that same hand pointing back at you...
--Richard
