By now, most thinking people must have recognized that the “free market” revered by conservatives is just a fancy term for chaos and eventual financial disaster. If you applied that concept to your own family, everyone, kids included, would just shop, shop, shop until you had no money or credit left, and then starve, starve, starve…
It’s the “free market” that caused the American housing-bubble disaster. With little or no central planning to guide or inhibit them, developers went wild a few years ago, grabbing vacant land wherever they could find it, and building millions of ticky-tacky homes, especially in “Sun Belt” states like Arizona, California and Florida. I was working for the Tampa Tribune at the time and interviewed some of these “entrepreneurs.” They told me they were anticipating the retirement of “baby boomers” who would indubitably want to buy houses in the sunshine.
Possibly seduced by this line of thinking, a horde of speculators, many of them amateurs with limited resources, snapped up houses as fast as they could be tacked together. And banks opened their vaults to enable reckless speculation. Politicians eager to be thought of as fostering the American Dream pulled out all the stops on government backed housing loans. Low-income families took out mortgages they could not possibly afford, misled by deceptive introductory rates. Banks and unscrupulous predators encouraged homeowners to take out second mortgages based on soaring real estate prices. Homeowners felt rich. Many of them went on a disastrous binge, borrowing (mortgage) money for vacations, remodeling, new SUVs, college fees, and whatever else they felt they “needed.” It was a bubble that had to burst.
I don’t know exactly what burst the bubble. I guess the the 78 million “boomers” didn’t retire soon enough, or couldn’t afford houses in the sun, or couldn’t sell their houses in the snow, or something unexpected like that. Anyway, the “free market” failed to provide whatever “checks and balances” conservatives had envisioned.
Now, there are houses for sale everywhere and far too few people buying them. The National Association of Realtors estimates that there were 4.2 million existing homes for sale in November, an 11.2-month supply at the current sales pace. (And it seems likely that these figures, which are already at record highs, are underestimating the situation.) Economists are warning that until supply can be reduced to a level of six-to-seven months, home prices will continue to spiral into the abyss.
The bursting real estate bubble caused the collapse of the financial and economic system in America and a devastating ripple effect throughout the world. Unless something drastic is done,the global economy might cease to function, and we could be back to the barter system before long. The crisis is so severe that in the final days of the Bush Administration, the G7 (America, Canada, the UK, Germany, France, Japan and Italy) agreed on an emergency plan to partly nationalize failing banks.
Meanwhile, the Obama Administration has been left to pick up the pieces in America, and you can bet that any restrictions the new President and Congress impose will evoke screams of protest from “free market” conservatives. Yet something must be done – and I don’t mean simply bailing out the banks and, along the way, some of the multitude of homeowners facing foreclosure. The government must accept long-term responsibility for the market. That means financial and development planning.
If conservatives are dismayed by the “socialist” policies being implemented by developed countries today, wait until they see what is coming – what has to come – before the situation is brought under control.