Like the Dotcomerdammerung?
17 March 2008 - 11 אדר ב' 5768 by Huw
No. worse, according to Wired:
It doesn’t sound all that different from current economic woes, but the key difference is that the last market downturn was neatly contained in the tech industry. As a result, the overall market returned to its previous levels within months of April 2000, and by 2004, even the IPO market had rebounded. This time around, because of the desperate credit crisis among banks, an economic downturn could be more widespread and debilitating.
Although any of us may offer the idea that, well, hey, my house was not one of these sub-prime things, or, well, I don’t have any major debt, we’d be missing the point. It’s much bigger than all that. The New York Times says,
“The problem is bigger than the Fed,” said Meredith A. Whitney, an Oppenheimer financial services analyst. “Trillions of dollars of securities were underwritten on the false assumption house prices could never go down on a national basis. That falsehood has put the entire financial system in a tailspin.”
If we are looking at a credit crisis based on the housing market, we forget that the basic premise of American Capitalism is to throw money after profit. Everyone thought they’d make money with houses. HGTV - “House and Garden Television” - is an entire TV Network based on the idea that you bought your house not to provide a rooted home for your children and grandchildren unto successive generations, but rather so you could sell it in a few years with a $100,000 profit. Follow their suggestions and you can do it much faster! How much of our retirement funds are invested in housing by our brokers? How many of our pension funds are in housing? How many of our banks - with all of our savings and credit card debt - are fully invested in housing?
This collapse, like the Dot-Com bust, is based on Greed. Money is not magic: it doesn’t multiply without a referent. The bubble inflates and then it explodes.
And takes down the rest of us, too.
If the BBC is to be believed, the run on banks has already begun.
The Bank of England on Monday made an extra £5bn ($10bn) available for UK banks to borrow to ease credit fears.
The money was five times over-subscribed.
Where’s your money?
I blogged in 2000, “Welcome to the 3rd World.” We came close, but we didn’t get there. How close will we come this time?
