The Housing Bubble

A piece by Murray Dobbin in Rabble. “In these days of economic stagnation, misery and insecurity, housing bubbles and the growing precariate, it seems appropriate to speculate on what Shakespeare might have written today were he penning a modern rewrite of Henry VI. In declaring, ‘first let’s kill all the lawyers,’ his character was voicing support for Jack Cade, whose revolutionary vision cast lawyers as paper-shuffling parasites ruining the lives of the common people. In the past 25 years that ignoble role has been usurped by economists. I liked them better when economics was called the dismal science — now the profession is simply a self-satisfied apologia for the plunder of society’s wealth by the greedy and ruthless 1% — the ‘masters of mankind.’”

“Economics is no longer a science, if it ever was. It is a religion whose priests bend every effort to make the dogma of neoliberalism impervious to its disastrous outcomes. If it were a science the facts would long ago have prevailed and they would have denounced the ideology from the rooftops. Over 700,000 people would be financially stressed if interest rates rose by even a quarter of one per cent. One million would face that circumstance if they rose by one per cent. The Canadian Payroll Association regularly tracks people’s financial stress and its recent survey revealed 48 per cent of people said ‘it would be tough to meet their financial obligations if their paycheque was delayed even by a week. Almost one-quarter doubted they could come up with $2,000 for an emergency expense in the next month.’”

“I’m sorry, but that’s insane in a country that creates as much wealth as Canada does. But don’t expect ‘the profession’ to shed any light on this situation. Why? Because economists suffer from SIB — Self-Interest Bias, a condition rooted in their elitist role in society.”

“To distract us from our grim present and grimmer future the priesthood talks endlessly about the Bank of Canada’s interest rate as if changing it could actually improve peoples’ lives. But the Bank of Canada can accomplish one of only two possible results: nothing (by keeping rates below 1 per cent) or disaster (by raising rates and popping the housing bubble).”

“The fact is, those trapped within the context of neoliberal policies don’t have a clue what to do. But everyone knows it’s going to get worse.”

From Ian Welsh. “One should understand why people have lost trust in experts, the media and politicians. It is not difficult, it is the same reason people lost faith in Soviet Communism: promises were made that turned out to be lies: they were not kept. That order has now betrayed too many people, and it is falling. It will continue to fall. We are in the twilight of Neoliberalism (longer article on that later.)”

“But this is why people are going for ‘fake news.’ This is why people are willing to listen to demagogues. This is why people don’t trust the press (why should they, the press lied to them repeatedly, it is the original fake news). This is why they don’t listen when hundreds of economists say Brexit is bad (why should they, most economists missed the housing bubble.)”

From The Nation. “Periods of liberal advancement have short, fast lives. Obama came to office after 30 years of conservative dominance in politics—just as that dominance was collapsing, but before a new liberal vision of the economy could be firmly put in place. As a result, his economic platform was caught between two periods: one centrist and defensive against conservative assaults, the other growing more assertively liberal. Much was accomplished, but those accomplishments now appear to be fleeting.”

“The biggest challenge Obama faced was the Great Recession, a period in which unemployment skyrocketed to 10 percent and only slowly came down in the next eight years. This recession destroyed the consensus view that the Federal Reserve had an almost omnipotent ability to steer the economy, and that the most useful role for the rest of the government was to provide a good atmosphere for investment. But Obama struggled to replace that consensus with a broader vision of how (and for whom) the economy actually works.”

“Income inequality has continued to grow during his tenure, while wage growth has been sluggish. He failed to put more aggressive members on the board of the Federal Reserve, with some positions sitting vacant for long periods. Efforts to deal with bad housing debt and foreclosures—the real drivers of the economy’s weakness—weren’t pursued with the same vigor that bailing out the banks was.”

“Lacking a firmer liberal foundation, Obama then went to the opposite extreme, arguing that mass unemployment was driven by technology and uncertainty over the debt rather than weak spending. The response to the financial crisis was limited by the older consensus. There were no widespread criminal prosecutions for the fraud that occurred on Wall Street, whether it was selling bad mortgage packages, manipulating interest rates, or foreclosing on homeowners without any of the necessary supporting documents. Bankruptcy laws weren’t changed to prevent foreclosures; a wholesale restructuring of the ‘too-big-to-fail’ banks wasn’t on the agenda.”

From Southern California Public Radio. “The Oakland warehouse fire earlier this month hasn’t just raised anxiety with fans of the underground music scene, it could also affect Angelenos living in unpermitted housing. Jay in Koreatown said he’s lived in unpermitted housing in the past, and there should be a compromise between a crackdown and no regulation for places like the Ghost Ship. JAY: ‘What happened at the Ghost Ship is very rare. I see an overreaction going on here. If we pay just a little supervision to these spaces, they could be slated for living. Especially since they’re a reflection on how housing is so overpriced now, and we have this glut of open warehouse spaces that nobody is using.’”

From Realty Biz News. “Real estate analyst firm Redfin has revealed that a staggering 2.7 million Americans faced eviction in 2015, and further claims that figure is likely a very conservative estimate of the true number of U.S. families evicted from their homes in the past year. Redfin says the evidence suggests rents are out of control, families aren’t earning enough, and as a result they have to pay too much out of their wage checks to be able to make ends meet.”

“‘Evictions are a silent threat to America’s cities. As alarming as Redfin’s finding on evictions is, it likely undercounts the true number of families forced out of their homes each year since many evictions happen outside the court system,’ said Redfin chief economist Nela Richardson. ‘More families are renting than ever before, and roughly half of them are spending too much of their income on rent. Stagnant wages, a lack of affordable housing and escalating rents means that many families are living just a paycheck or two away from facing eviction, which can often lead to job loss or even homelessness. This is a national crisis that requires national attention.’”

“The worry is that this trend is accelerating. According to Redfin, there were 20 million renters in the U.S. in 2015, and more than half of these are ‘cost burdened’ – which means they’re forced to spend at least 30 percent of their income on rent, up from 15 million in 2001. Redfin also notes that rents have increased by 66 percent since 2000, while incomes have only risen by 35 percent during the same period.”