When I looked around to buy a house in the land of opportunities during the last quarter of year 2005, I couldn’t help wondering about the apparent but glossed over disconnect between real estate prices and real buying power of average Americans. House prices spiked dramatically at the rate of 200 percent in less than a year. Mortgage lenders and developers sprang up everywhere. Having exhausted those with a credit history, they turned their attention towards the softer underbelly of the population - barely legal immigrants and job hopping victims of credit card vultures. To grant them entry into the brave new American dream, their benefactors provided an opening in the name of deferred principle and interest rates a.k.a sub-prime mortgage. In time reality set in - bills began to show up with their true numbers. Occupiers of the houses fled abandoning their unsolicited dreams.
The word spread rapidly. Foreclosure signs began to appear in neighborhoods. Soon everyone understood what Katrina had forewarned. Once the canopy of denial is flung open, you know the dweller of the pretty home across the street was a poor man made homeless by greed.
But what I didn’t realize like everyone else then was the depth to which housing speculators had dug their hands to fund the project to build a home for every decent and hard working American. Insurance companies, mutual funds, investment bankers had all diverted funds into the project to make some fast buck. Its unreal to think that companies like Lehman Brothers and Investment banks like Washington Mutual which survived the great depression of 1930s would go belly up with a day’s notice. Insurance giant AIG is propped up by the Federal government for now. So are Merrill Lynch and Goldman Sachs. Retirement funds and other savings are at risk to send shivers through many an aging bones.
Most significant fallout of all this is its worldwide impact. China made major investment in U.S market. So are the Japanese, Germans and Oil barons in the middle east. Even ICICI bank in India had a major investment in Lehman Brothers. Stock markets around the world have been shaken by this quake which may not have reached its highest point yet.
At the core of this problem is the sustained implementation of Republicans’ conservative ideologies on government’s role in capital market and legitimization of corporate greed. Reagonomics of deregulation and huge tax cuts and credits to big corporations were continued for the past two decades with republican dominated senate and congress even though Clinton, a conservative liberal was president during its time of bliss. Another aspect of republican politics is its clever and tactical use of wedge issues such as abortion and gay rights with biblical references to undercut criticisms from the left on its economic policies, especially during elections. Clearly, the Republicans favor rich folks who need geopolitical and logistical opportunities to make their billions since we now know a lot more about Enron adventures in third world countries, tax credits for self-serving Oil corporations and how Iraq became a goldmine for Halliburton. Deregulation is the toast of the time and yet the number of career politicians accused of corruption and behind bars are increasing.
There is a significant section of Americans who are blissfully unaware of world’s perception of themselves. They fear change and embrace status-quo. For them there is no creature more disgusting and revolting than a liberal democrat who is out to increase tax and unleash gays into their private Christian lives. They do not care a fig about the world and they truly believe that the war in Iraq is convenient and after all things considered Pakistan is still an ally. Drop names like Nancy Pelosi and Harry Reid - they’ll run to polling booth to vote for a serial killer under republican column.
It is important to note that the sternest opposition to W. Bush‘s $700 billion bail-out plan has come from the Republicans and not Democrats. They are worried about facing impending senatorial and congressional elections and the real possibility of owning up a greater depression if things took a turn for the worse. No wonder Republican presidential hopeful McCain is doing everything he can to usurp the message of change from Obama. He lived most of his life during the cold war era and appears to be cruising in a time machine inexorably into the past. He admitted several times that he has no clue on economy and he would rather spend his time on foreign policy. Engaging in geopolitical conflict a.k.a war economics is after all a Republican contribution to humanity. Given that depression is unofficially declared, McCain’s military Keynesianism is just what the doctor order to secure this damn world.