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May 16, 2005Why I’m Not WorriedBy Dana Blankenhorn: A lot of liberals are very upset right now over actions of the Bush Administration. People are dying. Women are being denied their rights. Gays are being denied their rights. The judiciary is being perverted. The media is being perverted. My reaction? Ho, hum. It’s not that I’m completely sanguine about this Administration. Most of what we’re seeing is the predictable result of Bush’s 2004 victory, and the natural tendency of a second term incumbent to over-reach. But everything I see indicates the public isn’t fooled by any of this. And there are two other bombs about to go off under this Administration, bombs the Administration set itself, economic nukes that will obliterate it, and all its works, forever. The bombs are China and the Real Estate Boom. China’s rise from regional power to co-equal superpower happened entirely on the watch of this President. China now controls the U.S. economy, because it owns a large portion of our debt – debt we’re still piling up. Bush has been blind to the problem of China, even aided and abetted its rise, ever since he came to power. When the Yuan rises, when the prices at Wal-Mart skyrocket, when Taiwan is gobbled up and we find ourselves powerless to do anything about it, so all our chips come from our main economic rival, Bush policies will get 100% of the blame. No amount of spinning will wash that guilt away. It’s there. And few will care about how the mess came to be – they’ll see the results in their own lives and demand human sacrifice. The Real Estate Boom may go off before or after China. I’m guessing before. Over the last decade two quasi-federal agencies, dubbed Fannie Mae and Freddie Mac, have been able to create $1.5 trillion of real estate debt with no controls. This started under Clinton, but blaming him at this point is like the drug addict blaming the pusher who gave them their first taste. Credit checks on real estate buyers have disappeared. You can now buy 102% of a home’s purchase price, on an all-interest adjustable rate note, so long as you can make the first payment on the thing. That’s how crazy speculation has gotten. Agencies created to make housing affordable have, in fact, made it completely unaffordable. In this kind of super-heated environment you don’t need falling prices to get a collapse. All you need is for gains to slow. At that point some of the idiots who got these loans will have to sell, starting a vicious cycle. The only reason Bush won last year was because the economy remained strong. It remained strong because real estate speculation replaced stock speculation. Look around your neighborhood. Look at all the SUVs driving around with agents and speculators still sporting their W ’04 bumper snickers. How you think these folks are going to feel when it all turns to dust, and given the illiquid nature of real estate everyone’s going to fall down, including most of those who try heading for the exits right now. The last real estate crash, in the mid-1970s, took nearly a decade to clear out. This one is going to be bigger. And the quasi-federal guarantees on those FNMA bonds mean either we the taxpayers go on the hook for that money or the creditworthiness of the U.S.A. disappears. It’s the perfect economic storm. And the only way to start digging out is through policies Democrats have been advocating since 1993. Move toward balanced budgets. Make the tax system fairer. Invest in education and in people. No change in our message is necessary. When people really get mad (and they will) Howard Dean’s 2003 speech to California Democrats will sound brilliant. He’s the right man, in the right position, to stick the knife in Bush-ism’s back. He’s got it in his hand. He’s got the Internet tools needed to drive the message home. When the moment arrives, the crowd will roar, the knife will come down, and history will write of this era the way it ought to do, as the Great Mistake America will never repeat. It’s going to happen. It’s going to be painful for everyone. But one thing is certain. Today’s Republican Party will not survive it. Dana Blankenhorn danablankenhorn@mindspring.comMooreslore Blog / ZDNet OpenSource A-Clue.Com Posted by Jock Gill at May 16, 2005 12:23 PM | TrackBack Comments
Don't blame our current president alone - China's rise can be attributed to every U.S. President since Nixon (I highly recommend "About Face" by James Mann on the subject). I don't doubt, however, that what you note is true and the fact that China owns a large portion of our national debt is absolutely NOT positive development. If Mr. Bush isn't on this I do hope the NSA damn well is and that someone, somewhere is advising the administration on the matter. *here's crossing my fingers because that's about all I can do* Posted by: SRoque at September 3, 2005 12:26 PMPost a comment
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