The Death of Capitalism - its Socialism's fault

[Mick Mac]

I had a thought the other day about all of this sub prime banking fiasco.

US person No 1, with little or no earnings, applies for a mortgage he cannot afford - he gets it and buys a house at an inflated price from another US person No2 who is "enriched". US Person No1 cannot repay and defaults. Meanwile the US institution with No.1's debt has already sold that debt on so is relatively unaffected. RBS/ABN Amro or some other UK/european finance house now has this worthless debt. UK taxpayer injects funds into banks to cover the sub prime losses.

So cutting out a few middlemen, the UK taxpayer paid for US person No2's house, and he has our money. US person No2 has never said thanks. US government has never said sorry or thanks to the rest of the world for spreading this valueless debt around the world, sold with the help of AAA ratings provided by US ratings institutions.

Sub prime is at the start of all of this. Capitalism has never been more unpopular and is blamed for all of this, however it was Bill Clinton that started it all - he insisted that everyone, no matter how little earnings they have, should be able to own a home and have a mortgage, this was a kind hearted but socialist ideal.

Socialism has brought down capitalism. Bloody socialists. Ironic innit. And US people have our money - we have their useless debt.

This is my 1000th post (cheers) so thought I should say something controversial.

[Brendan]

Serves us right for developing a world where banks have become responsible for providing something as fundamental as housing.

[????]

1,000

[andrewc]

Capitalists often say that everyone can be rich.. at least thats what they say.

It was Bush who got behind the idea of houses for all in the name of capitalism and I would

say not socialism.

I think your post is controversial but not quite accurate...but I like a good chat me.

[SeanMacGabhann]

Capitalists say ANYone can be rich - which is quite different from everyone..

[Jeremy]

I disagree that the idea of everyone being able to own a home is a socialist one. Nobody ever called Thatcher a socialist for the "right to buy" scheme.

Neither do I agree that banks have become responsible for providing housing.

Also, the notion of the UK taxpayer directly footing the bill for the bad investments is over-simplistic.

[????]

I blame the middle classes

[Mick Mac]

It was Bush who got behind the idea of houses for all in the name of capitalism and I would

say not socialism.

I think I am more accurate than you might think andrew, it was Clinton who created and pushed this idea before Bush, a quick search reveals this article:

Clinton role in sub prime crisis

[Jeremy]

Clinton was no Socialist. Left wing on the scale of US politics is nowhere near Socialism. Besides, as I already said, Thatcher was very keen on people buying their own properties.

Private ownership vs state ownership is firmly in the realm of capitalism, I would say.

[snorky]

If socialism is behind the current malaise ( which it is patently not ), then we have to thanks socialism for this fleeting moment of clarity where it is possible that lessons can be learned and steps taken to avoid such wretched exceses in the future.

Of course, in 5 years time, when we are full steam ahead and houses prices are leaping up, 2008/9 will be a hazy sepia tinted memory for the vast majority of us = the cycle begins again

[Brendan]

Hitler was a socialist.

[Mikecg]

And he was a right evil bastard.

[Mick Mac]

The policy of houses for poor people who cannot afford them is a solialist policy in my book in that its a policy of equality, no matter how poor you are you can own your own home, ie giving to the poor = equalisation/fairness.

[Brendan]

Well the policy of housing provision is just good government. If you have homeless people all over the place it?s going to bugger your country up somehow.

The question of how you provide that housing and what standard of housing you make available is where political philosophy comes in.

[Brendan]

Jeremy Wrote:

-------------------------------------------------------

> Neither do I agree that banks have become

> responsible for providing housing.

Yes they have.

(That's as much of an argument as I can muster at the moment)

[Mick Mac]

Agreed Brendan, and council housing is perhaps a better option.

Where Thatcher's policy on buy your own council house differed from the US is that it was based on ability to pay. Also in the uk the debt remains with you for 12 years if your house is repossed so UK homeowners fight repossion at all costs.

But the US combination of allocating property to people, together with a debt they cannot afford, and a law whereby they are allowed to walk away from this debt by dropping the keys back at the bank, is a policy/legal combination that was doomed to failure.

[andrewc]

Mick.. I accept that Clinton may have got the ball rolling but an American left winger is still more

right wing than most of our tories, so I still dont think you can call it socialism... more like wealth creation for as many as possible. They had a fit when they wanted to help the banks in the USA and called that socialism not the original policy of giving our dodgy mortgages.

Mick Mac Wrote:

-------------------------------------------------------

> It was Bush who got behind the idea of houses for

> all in the name of capitalism and I would

> say not socialism.

>

> I think I am more accurate than you might think

> andrew, it was Clinton who created and pushed this

> idea before Bush, a quick search reveals this

> article:

>

> Clinton role in sub prime crisis

[Mick Mac]

"I accept that Clinton may have got the ball rolling but an American left winger is still more

right wing than most of our tories,"

I agree completley - does not mean it is not a socialist policy though.

Hand on heart, I wrote my original post before coming across the concept anywhere else, but I think this article puts my point pretty well. It refers to a "well meaning" "social policy" where banks were forced by government to lower their lending criteria to benefit the US migrant population - not greed in lending, but more a case of government interventionism:

Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory."

[andrewc]

I think all your points are good.

How about this as a talking point.

Interesting that Thatcher used capitalism to convert socialists and Clinton used socialism to convert capitalists and both did it using the same method...enabling poor people to buy houses.

I know that was a simplistic analysis but..its only chat.

[Kells]

Personally, I'm quite glad of the housing market cycle. In about 10 yrs time, just in time for the next slump, I should have quite a tidy deposit saved. If I had at the moment, I'd definitely buy.

This is sounding like a true capatilist - blame isn't single sided. Surely the investment banks who bought these repackaged debts were at fault too? I don't understand how, with any level of maths, you can make a bad debt look like a good investment. Although I'd be the first to admit that I could be easily confused. Very.