The Hollywood Liberal

Bubble People and the Faith-Based Market. Trouble in Squanderville

Counterpunch
Excerpt
Two years ago, anyone who wrote about the housing bubble was dismissed as a conspiracy nut. Now hardly a day goes by that the headlines aren’t splattered with the details of the massive meltdown in the real estate market.
What changed? The facts are essentially the same today as they were back then. In fact, the “Economist”–as well as many independent journalists–had already shown that the Fed’s low interest rates had inflated the biggest equity bubble in history which could potentially bring down the entire economy.
Now, all of a sudden, the media is acting as if the problem sprouted up overnight?
Why?
The notion that the media was unaware of what was going on is ridiculous. The business pages in America’s newspapers are written by some of the country’s “best and brightest”; most of them have MBAs which they earned at our finest universities.
Is it possible that they were oblivious to the trillions of dollars that were funneled into the real estate market to unqualified loan applicants? Or that they didn’t know that the rising prices had no relation GDP, increases in wages or productivity.
Is it possible that some of our best educated business prognosticators don’t understand the effects of low interest rates or the speculative bubbles they naturally create?
It’s simply not possible—-the effects of interest rates are the first thing that one learns in Econ 101.

HLs Take
About 3-4 years ago I was looking at houses in the ridiculously overpriced Southern California market. Back then Houses would go on sale on Monday, and be sold on Wednesday for considerably more then the original asking price. I quickly realized I had no chance of affording one, so I stayed in my apartment. Little did I realize at the time that the market was being glutted by people who had no business buying a house but did anyway through the subprime market. Prices were skyrocketing so fast it made your head spin. I have to put some of the blame for that on the people who are now going into default because their higher interest rates are kicking in and now they can’t afford the payments. How do you get into such a huge commitment without reading the fine print? Of course the government and lenders know that a lot of people are that negligent, and pumped up the market to people that couldn’t afford it so they could all make their commissions and worry about the rest later. Kind of like the way the Bush administration operates. Now houses are staying on the market for 6 months or more but owners have not yet lowered their asking prices because they hope somehow the market will rebound. Soon enough they won’t be able to hold on any longer, then look out below. Excellent article by Mike Whitney, click through and read the whole thing

This entry was posted on Wednesday, April 18th, 2007 at 10:12 am and is filed under H.L. News, Main Blog (All Posts). You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.