Patrick Deneen takes measure of the markets, and our own moral complicity in the meltdown:
Tonight, as I scan channels and read explanations online, numberless narratives look for someone to blame. George W. Bush. Predatory lenders. A craven government that refused to regulate. Big corporations. Big government. Someone. Anyone.We refuse to consider our own complicity. We started "paying" for things using credit cards. We demanded everyday low prices, and assented to the American military to secure a firesale on the goods of the earth. We began misusing language, like calling fantasy equity sources our "homes." Lemming-like we threw our children into the maw of a meritocratic meat-grinder, desperately seeking to ensure their successful corporate future by enrolling them in the best pre-schools - convinced that only an entry-level job at Lehman Brothers insured a successful life.
The symptoms were countless. The source was a loss of self-government, lodged most deeply in the fantasy that something could be gotten for nothing. If the fantasy continues to unravel - as every indication now suggests - we may re-enter a reality-based world. We will be poorer, but perhaps not in spirit. We may begin to value well and aright. While the world quakes tonight in the fear of plunging values, in that impending fall I see the inklings of a phoenix in the ashes that may arise and illuminate a fundamental truth: things of actual value - whether crafted by human hand or born of human relationships - are the products of work, memory, care, and fidelity. Dazzled by fantasy, we have been blinded to this truth, but a dimming of New York's neon glare may yet make this reality newly visible and even beautiful to behold.
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a lot of people are going to lose their homes, rent for a while, and then get new homes at a reasonable price (If, in fact, anyone is giving out home loans), and not really be harmed. Their credit might be 'bad', but credit is relative, and if everyone has bad credit, no one does. And everyone who got a home at a reasonable price before all this started are fine. / The collapse of the housing bubble is only important with regard to the fact it's totally screwed up the banking industry.
This is a VERY good point, and one I wish were made more often in all the hand-wringing WRT foreclosures, etc.
WRT the origins of this financial crisis, NINJA loans, etc., were certainly a factor; but so also were
1) Low domestic interest rates (resulting from Fed policies & massive imports of Asian capital);
2) Incompetent securitizations (mainly private-label) enabling the financing of 1); and
3) Perhaps most importantly, mass acceptance of the (utterly insane) memes of "housing = investment" and "housing prices will never go down", which magically transformed completely-moronic loans, securities, etc., into economically-rational actions.
Perhaps most importantly, mass acceptance of the (utterly insane) memes of "housing = investment" and "housing prices will never go down", which magically transformed completely-moronic loans, securities, etc., into economically-rational actions.
Yeah. Honestly, a few 'important' people getting on national TV and repeating how insanely stupid this was and that housing prices certainly would go do could have stopped them whole thing around 2004. Instead, we had nearly the opposite, with 'investment' advice on how to flip houses and not a peep from anyone in charge about how that was all incredibly stupid and housing prices, over the entire history of mankind, has hovered around a specific ratio to earnings and there is absolutely no reason to think they'd always go up.
And don't tell me they didn't know then. I knew then. I've been resisting buying a home for almost five years, despite my entire family trying to get me into one and claiming renting was 'wasting my money' when I should be 'building equity'. My father offered to help with a down payment, my grandmother offered a loan to start me off, etc etc, and I said 'Um, I'll pass buying a 175% price-inflated house, but thanks.'.
And I was sounding more and more like a paranoid lunatic as the housing price collapse I kept predicting didn't show up...until it did. I know it sound inappropriate, but when I finally heard about this on the news being talked about seriously, my first feeling was relief in that I didn't have to stand there and defend that decision anymore, that I wasn't, in fact, crazy. And they now appear to think I knew this entire mess was coming, despite the fact I had no idea of any bank troubles that would happen.
DavidTC,
You and I actually have a fair amount of common ground on analyzing this. I think the current mess has two primary causes -- deregulation and the real-estate bubble -- and I do agree with you that there was a feedback loop in which deregulation fed the bubble. The place where we differ is this: you say that deregulation caused the bubble, period; I think it was a contributing cause, along with classic bubble psychology. The real estate market is, of course, not one national market but many local ones, some of which have had much greater run-ups, and collapses, than others. But the lending rules were relaxed country-wide (so to speak). If the bubble were solely a product of the lending deregulation, the bubble would have been more evenly distributed around the country.
I also think that deregulation has made the consequences of the bursting of the bubble for the financial markets much, much worse than they would have been otherwise. There were some durn good reasons for a lot of those restrictions that had been around since the '30s. Shame on everybody for getting rid of them.
I'm very happy to have bought my house in 2000 in a market that has never had a dramatic run up. Good for you for resisting the pressure to buy at the wrong time.
Okay, I spend somewhere between $600-$800 a month on "groceries," but since my food shopping trips to Walmart generally include small items that are non-food, it's probably safe to say that the lower end is accurate.
And I have five kids, three of whom are teenagers, including two athletes and a serious dancer (no, she's not anorexic, she eats to stay active.)
I STILL can't fathom how two people spend $800 on eating at home, unless they're buying gourmet-everything at the upscale markets, for which there's absolutely no need.
And English Voice, the point about credit card debt is not that it caused the crisis, but that it leaves people vulnerable in a crisis.
However, there's a weakness in the "people need houses" argument -- owned homes are not the only way to keep a roof over your head. If the distortedly attractive loans had not existed, those people would not have been homeless -- they would have stayed within their actual means, either by buying less house or remaining tenants or with a mortgage that they'd already been paying down.
However, there's a weakness in the "people need houses" argument -- owned homes are not the only way to keep a roof over your head.
Yes, exactly.
Buying a home is one of those 'American Dreams' that get gilded into unreality by the real estate and banking industries, and which get swallowed whole by way too many consumers. More people should rigorously examine whether they are *really* better off buying instead of renting, both in the long run and short run. It's simply not true that buying a home is the best option for EVERYONE at any given time in their life.
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