Can we finally take off our hats to everybody who said the market rise and economic recovery banter was just a crock of liquidity served up with your tax dollars? Take a look at this from Bloomberg yesterday:
Purchases of US new homes fell in May to the lowest level on record after a tax credit expired, showing the market remains dependent on government support. Sales collapsed an unprecedented 33% from April to an annual pace of 300,000, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down.
If you’ve tried getting a home loan recently, or any loan for that matter, you’re nodding right now and asking rhetorically in your best Looney Tunes Abominable Snowman voice, “Gee, I wonder why?”
Banks are about as generous with their zero-percent capital from Uncle Sam as Steve Ballmer is with iPad compliments. Many of my rich friends, beyond qualified for the loans they’ve sought recently, turned up empty handed from banks that previously lent money to any jackass with a pen in his hand who lied about the job he didn’t have. That, you’ll recall, became the subprime mortgage crisis.
The bastard bankers created it by lending boatloads to unqualified borrowers. Those lenders were too big to fail, so Uncle Sam rescued them with your tax dollars and injected them with zero-percent cash to lend and get the economy going again. Instead, they got the stock market going and a few other asset areas. Pretty good deal if you can get it: accept free dough from Uncle Sam with your left hand, kick in the face any qualified borrower who tries using some of it to spur organic growth in the economy, and put the capital to work in asset markets with your right hand. There’s the economy, folks, and it stinks, stinks, stinks.
You watch. Another cronified stimulus will show up eventually, and the US balance sheet will sink further into bananaland. Doesn’t this stuff get under your skin and make you want to beat the tar out of somebody?
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Yes, it does get under the skin to watch greedy, souless actions of the power elite. This behavior has been going on for centuries, more like millennia, with the same actors playing out their manipulations in different skins. What is interesting is that their actions are more visible, for the moment, more transparent and the populace slightly more aware of the manipulations.
The behavior remains a dark perennial juggernaut but it is not the only force at play in the world. There are shards of light all around if you look for them–for instance, your book “Financially Stupid People…” Maybe it is getting a little easier for individuals to seek and find smarter choices right now, in order to move away from the crushing weight of the big wheel.
In the words of the Bach cantata: “Sleepers awake!”
Actually, how moral bankers are is not an issue. They aren’t immoral: they’re amoral. The fact is that they don’t care about morals: they care about profits. They want profits and if a moral act is needed to get a profit, they’ll do it just as easily as an immoral act to get a profit. Bankers felt they could make money loaning out sub-prime mortgages so they loaned them out. Now, bankers feel they can’t make money loaning out mortgages so they don’t. If bankers felt they could make a profit loaning out money now, they most assuredly would.
So I feel very few loans are being given out because the path to profit is not completely fog-free.
If, for example (very general example off the top of my head), the Government was willing to insure all loans given out by banks to people with a high minimum credit score, then bankers would loan money out to them. Or even better, if insurance companies started insuring loans for a fee, (since certain insurance companies do a lot of research beforehand,) banks would be much more confident loaning out money. Just an idea.
Good points, both. Thank you, Barbara and Andrew.
Frankly, I’ve given up on things ever changing. That’s why my new book doesn’t offer solutions. If solutions existed, they would have appeared earlier in history. They haven’t appeared because they don’t exist, and never will. This is human nature we’re up against.
That’s why I’m focused on just awakening more of the sleepers to what’s really at work in society, and what can be done to at least protect our own ability to accrue wealth. If enough people would wake up and stop acting predictably stupid, the shenanigans would stop because the amoral seeking of profit would no longer find profit in said shenanigans. However, enough people won’t wake up — human nature, again — so the shenanigans will continue because they’ll continue to work.
What I hope is that at least a handful of smarties will come to our side of the line, and we can carve out a community of non-duped citizens. That’s a type of solution, not to the societal problem in front of us but to the small problems the societal backdrop creates for us personally.
Exactly Andrew (Yeh).
One of the MAIN reasons for the bubble was the changes in the competitive and polticial landscape through a relaxing of restrictions… all through the politcially charged Government sponsored institutions of Freddie Mae and Freddie Mac.
This was not a free market at work. It reeks of political self-interest and vote grabbing from both sides… and it was the biggest determining factor of the bubble. RMBSs and CDOs were manufactured so that the banks could participate in the upside whilst minimising their risk. That is what they DO.
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