June 22, 2006

Pop. The end of the American dream?

Charles Hugh Smith makes some great points here about equity extraction, the decline of the middle class, and the fakeness of the current "boom" - a $4 Trillion debt fueled orgy of greed.
Now the music has stopped, and reality is setting in. Doom and gloom you may say. Reality I say.

And I'm especially pissed off at the Bush Administration's "Ownership Society" push on the lower classes. Yup, go buy a house from rich whitey right when its value peaked. The rich got richer, and the poor, well, F the poor.

(Extra HP credit for any discussion of the photo)

A great con has been played on the most vulnerable aspirants to the American Dream--those striving mightliy to join the middle class. Just buy a house, the doctrinaire pitch has it, and soon, thanks to rising housing prices, you'll have equity and thus some measure of wealth. After all, house values never drop, they only rise.

Only there was one little problem: millions of households didn't have the traditional 20% down payment--a standard which became ever more unattainable as housing prices exploded.

American homeowners are no longer sitting on paid-in-full homes; they're sitting on heavily leveraged mortgages they've taken out.

The cheerleaders are missing one key point. The collapse of the housing bubble won't just take out an isolated 10% of households; it will take them out first and then move down the economic chain in domino-like fashion

You do see where this is going, don't you? A political revolution is brewing. Not a violent revolution, of course, but one fueled by the catastrophic loss not just of whatever small capital those 150 million people (half of our nation's population of 300 million) might have acquired, but more importantly, perhaps, the loss of their belief in the American Dream--of home ownership and a life of luxury paid for by painless extraction of ever-rising equity.

33 comments:

Anonymous said...

The rich got richer, and the poor, well, F the poor.


You say that like it's a bad thing...

Anonymous said...

Am I first to press

Wow that's obscure.

Is the the engineer from Miss Saigon?

ahhh chasing the American Dream

John in Fort Collins

Anonymous said...

The so-called American 'dream' is but.

Anonymous said...

I personally welcome the loss of belief in the American Dream.

Mark in San Diego said...

The sad thing is, most people are still clueless about the housing bubble. . .

The MSM has been very reluctant to cover this story, because most city newspapers probably get 25% of their revenue from the Sunday housing supplements featuring adds for Toll Brothers etc. housing, and daily adds from condo developers in cities like San Diego and Miami. . .the San Diego Union's online edition is littered with condo adds, and if you click their webcams, most show a condo under construction.

There is plenty of blame to go around, realtors, mortgage brokers, press, and let's flog our education system again for failure to teach financial literacy. . .just as our last depression created a generation of savers, let's hope something good comes of this eventually.

psycho said...

"the loss of their belief in the American Dream--of home ownership and a life of luxury paid for by painless extraction of ever-rising equity"

"There Ain't No Such Thing As A Free Lunch"

Anonymous said...

Your liberalism is so obvious!! No one put a gun to the poors head and made them buy a house. They gave in to greed just like the middle class. Poor decisions yeild poor results. Maybe you should make everyones financial decisions for them. As far as I am concerned...@uck anyone who can't think for them selves and prepare to make the money to be made if your smart enough in this market decline!!

psycho said...

"And I'm especially pissed off at the Bush Administration's "Ownership Society" push on the lower classes. "

What US president would have stated there was a housing bubble and people should rent? I think you’re being a little unreasonable in this statement.

Anonymous said...

The new American Dream.

...paying off debit.

...keeping your job.

...living month to month.

psycho said...

"The new American Dream.

...paying off debit.

...keeping your job.

...living month to month. "

Just call it the new American SCREAM! Anyway it’s not like the buy a boat, get my wife breast implants, and get a Hemi HELOC idiots aren’t going to get what they deserve. Just be patient and buy their assets pennies on the dollar.

Anonymous said...

There's a reason why the poor get poorer. It's the same reason that they're poor in the first place: they're generally low-intelligence people who make bad life decisions, like having children when they're teenagers, dropping out of high school, and abusing drugs. Of course there are exceptions (the woman whose husband runs off and leaves her with the kids).

Those who don't fit this profile generally don't stay poor forever. They eventually lift themselves up by making good decisions and working hard.

Liberals romanticize poverty. To them, every poor person is a hard-working, virtous soul who got dealt a bad hand. The truth is, 99% of the time, they dealt their own cards.

Anonymous said...

"Your liberalism is so obvious!! No one put a gun to the poors head and made them buy a house. They gave in to greed just like the middle class. Poor decisions yeild poor results. Maybe you should make everyones financial decisions for them. As far as I am concerned...@uck anyone who can't think for them selves and prepare to make the money to be made if your smart enough in this market decline!!"

Your short-sightedness is obvious. Liberal? Conservative? You still use those terms? You think they have meaning?

You're so lost.

Anonymous said...

Please define middle class for me. I mut be ignorant, but I don't know who that encompasses.

Anonymous said...

They're still pushing no doc/bad credit loans on immigrants who can barely speak English in Seattle.

I'm sure it's happening everywhere. Once last gasp to get a few more people in now that those who are fluent in English are starting to get a clue about the market.

keith said...

yup, the engineer from miss saigon - during the "american dream" scene...

well, the good thing about the bubble burst is that bush is no longer pimping his "ownership society". let me see if I can find when the last time he yapped about that...

Budvarr said...

Define class?
Well traditionally we had the "Upper class" which consisted of the leadership class be it Aristos or commisars.
"Middle class" which were doctors, lawyers, mill owners, basically the professional classes.
"Working class" everone else.
Today Middle class seems to mean if you go to work in a shirt and tie, but just because you wear a shirt and tie whilst working in the mail room of an office for $5 an hour, you're not middle class no matter how much these people like to think so.

Anonymous said...

Stop the socialist bullshit.

The economic system assumes "adults" will be making decisions, and pay the consequences when they mess up.

Sure, the mortgage companies can be blamed for loaning money to anybody without qualifications, but they entered into these contracts on their own. Free market, just like payday loan companies (which compete for the same customers it seems...)

Anonymous said...

Comment on others about the poor.

Yes, it appears to be linked to bad decisions and general "intelligence" (which could be common sense in many cases).

Sure, someone can be dealt some setbacks, and we have "safety nets" for this. But the large fraction of long term poor continue to make bad life decisions, keeping them there. Look at New Orleans, and its dependency "we are victims" cycle.

If everyone who was poor was some John Steinbeck working hero, they would with their determination eventually work themselves up into a better situation. Why does Andy Grove arrive here with nothing, while welfare born americans stay that way?

Anonymous said...

The American dream is just a dream. The alarm clock just went off.

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