Where are all the doomsayers of 2006? Those people, who said the speculative real estate boom could not last, were a kind of answer.
Their argument necessarily called for a governmental solution, a need for immediate, perhaps even drastic regulation of a bubble gone wild and spreading, via securitized debt, throughout the world. By 2007, the doomsayers were even saying that this could result in a global credit freeze. These days, they content themselves with documenting the damage.
Government didn't listen; it continued to enable the bubble. Today, the lame duck Bush administration is desperately trying to restore credibility to securitized credit debt at unbelievable, unimaginable but inadequate public expense, as wave upon wave of defaults, we are told, are yet to come -- more residential mortgage defaults, commercial mortgage defaults, credit card defaults. The ever-cheery mainstream press is beginning to scrape the bottom of the barrel to find credentialled prophets willing to predict even a mid-term reversal of economic bad news.
Obama promised Change! but we doubt he'd like to take any credit for the real changes happening.
Meanwhile, American citizens are experiencing a state of mind remembered by very few, and most of them are too senile to remember it well: a massive loss of confidence, without which, it is said, our economy doesn't work too well. The vast
majority of living Americans grew up in a political and military economy constantly expanding, a society so full of itself it was actually able to forget Vietnam unless involved in it personally, or through relatives or friends. Last night such a friend was
describing the disintegration of American military bureaucracy in Saigon in the last years of the war and we realized that Vietnam had given us valuable training in governmental
disintegration there and here. But, still, there was an abiding faith in the power of the US economy and even its politics once it got its direction right again. The vast amnesia was
itself the warning. Life goes on, they said. We're still young! It went on, all right, on a gravy train of denial that gathered momentum as it went.
American citizens with an inadequate tolerance for denial fell off the train into various camps along the tracks, falling into their little acts of memory and conversation, which became increasingly aberrant as time went on until at last the Nation That Ended History arrived on a ground swell of total ideological gibberish, terrorists provided us a gruesome opportunity to "go mad again" (as Le Carre put it) and off we went. The latest intelligence reports forecast greater danger from nuclear attack than the world has ever faced. And, so far, Obama's appointments have strained credulity, although of course it is always important to hope and be positive.
Learned social scientists and commentators lately have been reduced to using the S-word (stupid) to describe the political economy, including the wars. It really is stupid to leave all planning to the forces of the “free market.” We’ve done all this before, and after the trusts and the plutocrats took their plunder, it brought us the Great Depression. “Free markets” don’t work when those markets are dominated by oligopoly or monopoly market power that can and does reduce production rather than lower prices. Detroit is willing to go bankrupt without an unspecified government bailout rather than produce the cars we need at prices we can afford. Developers just don’t finish subdivisions when the housing prices fall.
Or are these things caused by a freeze in credit markets? And what is a “credit market”? Something to do with banks? And why aren’t banks lending money? Don’t they have any? Or is it that they don’t have confidence they will be repaid? Isn’t the federal government paying them hundreds of billions in public funds to restore their confidence? If the bankers are too nervous to lend public funds to restore the “credit market,” why doesn’t the government nationalize the banks and do it, with its own (our) money? Who is getting the hundreds of billions? Is our government corruptly paying off the plutocrats? Again? Why are we allowing this to happen? We are a democracy, aren’t we? We can change government’s behavior, can’t we?
The economic depression we are entering is entirely the fault of US government – from the local to the federal. Government, and only government, could have prevented it by regulation and enforcement of existing law. Government chose not to be government. It chose to enable market power rather than to regulate it, in light of full knowledge from historical experience of what happens when it fails to regulate concentrations of ownership designed to defeat free markets. The mergers and acquisitions raged on as politicians and pundits lectured us about Adam Smith’s pin factory and Samuelson’s Economics 101 text. It chose to support speculative bubbles and busts rather than to suppress them.
An essential part of the economy in the last 30 years that doesn’t receive the attention it deserves is the free market in elected officials from city council to US Congress, politicians who lead as if people or nature exist solely for corporate exploitation. But, then, most "news" is itself nothing but corporate propaganda. Just because the public cannot find its own self-interest most of the time doesn't mean that the corporations don't pinpoint theirs 24/7 before launching their attacks of disinformation and propaganda. Economic panic creates a strong public need for reliable information and there is scarcely enough of it to even make an intelligent guess.
Mortgages are not the only thing upside down these days.